Global brokerages retain #39;buy#39; on Ashok Leyland on hopes of demand revival

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Nomura believes that the M&HCV cycle is set for a sharp recovery over FY22-24 and expects further price hikes and operating leverage which will drive margin.

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The Ashok Leyland share gathered attention after the company narrowed its losses in the second quarter this year.

It reported a consolidated loss of Rs 84 crore for the July-September period compared to a loss of Rs 96 crore in the corresponding period last year.

Consolidated revenue improved by 44 percent on-year to Rs 5,562 crore. However, earnings before interest, tax, depreciation and amortisation (EBITDA) remained flat at Rs 576 crore as high commodity prices impacted margins. The EBITDA margins narrowed by 470 basis points to 10.3 percent.

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The Hinduja Group flagship firm is in talks with strategic and financial investors to raise funds for Switch Mobility, its newly formed electric vehicle (EV) subsidiary. The Chennai-based trucks and bus manufacturer has hived off its electric vehicle division to better tap the growth opportunities through onboarding of partners.

“Yes, we will look at investors. Discussions are going on for strategic and financial investors,” Ashok Leyland whole-time director and chief financial officer Gopal Mahadevan told Moneycontrol.

The stock was trading at Rs 148.80, down Rs 3.30, or 2.17 percent, in the early hours on November 16. It touched an intraday high of Rs 153.40 and an intraday low of Rs 148.75.

Also read: Ashok Leyland in talks with investors to raise funds for EV subsidiary Switch Mobility

According to Japanese research firm Nomura, the Q2 earnings was in line, considering the economic revival to drive the CV cycle. It has kept a ‘buy’ rating on the stock and has raised its target to Rs 175 per share, an upside of 18 percent from current market price. The brokerage firm believes that the M&HCV cycle is set for a sharp recovery over FY22-24 and expects further price hikes and operating leverage which will drive margin.

Jefferies also has a ‘buy’ call and has raised the target to Rs 175 from Rs 150 per share. The research firm is of the view that the truck demand is recovering fast and it expects a big upturn ahead.

Macquarie, on the other hand, has a ‘neutral’ call on the stock with target at Rs 162 per share. It has lowered FY22-23 EBITDA by 51 percent/25 percent and earnings by 87 percent /39 percent to factor lower volumes.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.