Shares of the Ashok Leyland Ltd were up almost 8 per cent in trades on Monday morning. The stock was trading at Rs 137.70 on NSE at 02:35PM (IST) on Monday, up 5.64 per cent from the previous close. Street also cheered the huge revenue jump in the company?s quarterly earnings. The stock quoted a 52-week low price of Rs 93.2 and a high of Rs 153.4.
The commercial vehicle maker exceeded Street expectations on all counts as it posted its earnings for the quarter ended March 2022. Profit came in much higher than what was expected at Rs 901.4 crore, while revenue saw a huge jump of 25 per cent on a year-on-year (YoY) basis to Rs 8,744 crore.
The company’s executive chairman Dheeraj Hinduja believes that the commercial vehicle (CV) industry in on the mend, in tandem with the macroeconomic environment. ?We have seen recovery in the fourth quarter and the overall performance has been very good. The commercial vehicle industry is on a recovery owing to the improvement in the macroeconomic environment and healthy demand from the end-user industries,? said Hinduja.
Hinduja attributes the recovery to MHCV (medium and heavy commercial vehicle) segment, which he thinks is turning the tide in favour of the company.
“The MHCV segment is leading the recovery, riding on the back of growth in core sectors such as construction and mining, agriculture, increased capital outlay for infrastructure projects and pent-up replacement demand,” he added.
Ashok Layland Share: Here?s What the Brokerages Are Saying
Jefferies maintains a ?buy? rating on the stock, raising the target price to Rs 160 from Rs 130 as it expects an upcycle ahead.
Research firm Credit Suisse has maintained outperform rating on the stock and raised the target price to Rs 169 per share.
The broking firm retained outperform rating on strong cyclical improvement in domestic CVs, reported CNBC-TV18.
Axis Securities, in its note said: ?Ashok Leyland Ltd (AL) reported a robust Q4FY22 performance, beating our as well as street estimates, primarily on account of healthy recovery in the commercial vehicle (CV) industry coupled with improved product mix and increase in ASPs. The net revenues stood at Rs 8,744 Cr (our estimate: Rs 8,205 Cr) as against Rs 7,000 Cr in Q4FY21, reporting a 25% YoY growth led by robust growth in the MHCV segment and export business. The overall volumes increased by ~11% YoY to 48K units along with a 13% increase in ASPs led by a richer product mix and price increases post-transition to BS6 norms. The company’s Gross Margins contracted by 135bps YoY to 21.8% (our estimate: 22 per cent) on account of higher RM cost inflation.
?We expect the recovery in the CV demand to sustain and gain further momentum in FY23E and FY24E. The medium-term outlook remains strong given (1) Improving macro-economic factors; an increase in fleet utilization to drive replacement demand and the government’s thrust on infrastructure and scrappage policy; and (2) Potential pick-up in bus demand as travel restrictions ease off and schools, colleges, and offices reopen,? Axis Securities said. Hence, we retain our BUY rating on the stock and keep the TP of Rs 160 unchanged as we value the stock at 19x its FY24E EPS, they added.
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