Global brokerages raise target price on Ashok Leyland post Q2; see over 18% upside

Global brokerages maintain their rating on Ashok Leyland post September quarter results but raised their respective 12-month target price as commercial vehicle maker narrowed losses.  

The most aggressive target price of Rs 175 was put out by Nomura and Jefferies that translates into an upside of over 18 per cent from Rs 152 recorded on 15 November.

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Commercial vehicles (CV) major Ashok Leyland has reported a year-on-year (YoY) standalone loss of Rs 83 crore for the quarter ended September 30, 2021, against a loss of Rs 147 crore posted in the year-ago quarter.

Its revenue from operations grew by 57.1 per cent to Rs 4,458 crore, against Rs 2,837 crore posted last year.

Earnings Before Interest Tax Depreciation and Amortization (EBITDA) stood at Rs 135 crore, up 68.8 per cent from Rs 80 crore posted last year. Its margin stood at 3 per cent in Q2FY22 from 2.8 per cent posted in Q2FY21.

We have collated a list of recommendations from various global brokerage firms according to a Zee Business TV report:

Nomura: Buy| Target raised to Rs 175 from Rs 157

Nomura maintained its buy rating on Ashok Leyland post September quarter results and raised the target price to Rs 175 from Rs 157 earlier.

The Q2 numbers were largely in-line with estimates and economic revival is likely to drive CV cycle in near future.
 
MHCV cycle is set for a sharp recovery over FY22-24F. “We expect further price hikes and operating leverage to drive margins,” said the note.

Jefferies: Buy| Target raised to Rs 175 from Rs 150

Jefferies maintained its buy rating on Ashok Leyland post September quarter results but raised the target price to Rs 175 from Rs 150 earlier.

The Q2 EBITDA grew by 67 per cent on a YoY basis but was 26 per cent below Jefferies estimates on lower-than-expected margin.
 
Truck demand is recovering fast, and we expect a big upturn ahead, said the note. Ashok Leyland's truck market share has dropped 10ppt since FY18 though
 
Macquarie: Neutral| Target raised to Rs 162 from Rs 132

Macquarie maintained its neutral rating on Ashok Leyland post September quarter results but raised the target price to Rs 162 from Rs 132 earlier.

The demand outlook remains strong on economic recovery and replacement demand. We lower FY22E/23E EBITDA by 51%/25% and earnings by 87%/39% to factor lower volumes, said the note.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)