Brokerages lower targets for Ashok Leyland amid softening volumes; retain positive outlook on gradual recovery

Ashok Leyland, the flagship of the Hinduja Group, saw a series of target price revisions from top brokerages, signalling caution due to moderating volume trends.

Despite the downward revisions, most analysts maintain a positive stance, reflecting optimism for gradual recovery and valuation support.

1. Nomura: Maintained its 'Buy' rating but slashed the target price to Rs 247 from Rs 283, citing slower-than-expected volume recovery. Nomura believes the company’s long-term prospects remain strong despite near-term headwinds.

2. Morgan Stanley: Reiterated its 'Overweight' stance, trimming the target to Rs 268 from Rs 284. The brokerage expects volume trends to improve gradually, driven by a favourable base effect. Morgan Stanley views Ashok Leyland’s valuation as supportive, underpinning its positive outlook.

3. Jefferies: Maintained a 'Hold' rating with a revised target of Rs 235, down from Rs 240. Jefferies expressed caution over the current volume softness, suggesting limited upside potential in the near term.

4. Citi: Retained its 'Buy' rating but reduced the target price to Rs 260 from Rs 275. Citi noted that while the overall outlook remains favorable, the near-term volume pressures have led to a conservative target adjustment.

5. JP Morgan: Kept its 'Overweight' rating intact, lowering the target to Rs 250 from Rs 257. The firm highlighted a gradual volume recovery as a key catalyst for the stock, while acknowledging current headwinds.

6. Goldman Sachs: Stood out by slightly increasing its target price to Rs 275 from Rs 270, while maintaining a 'Buy' recommendation. Goldman Sachs is betting on Ashok Leyland's robust positioning and potential market share gains as demand stabilizes.

Key takeaways

The consensus among brokerages reflects a cautious yet optimistic view of Ashok Leyland. The downward revision in targets indicates near-term challenges, particularly due to subdued volume trends. However, the majority of firms continue to hold a 'Buy' or 'Overweight' rating, underscoring confidence in a gradual recovery bolstered by a supportive valuation base.

Outlook: Recovery in sight

Analysts expect the recovery in commercial vehicle volumes to gain momentum, aided by macroeconomic tailwinds and a favorable base effect. While short-term challenges persist, the focus on improving demand dynamics and potential margin expansion positions Ashok Leyland for a rebound in the medium term.