Analysts see further gain even as Ashok Leyland nears peak
Grand Auto Management Ashok Leyland (ALL) is confident of a sustained recovery in volumes and margins over the medium term, and such confidence is such that markets rallied on Friday as the stock rose 6.64 percent to an intraday high of $167.80 — just 0.95 percent off its high in 52 weeks old at INR 169.40. The stock, which closed at $164.40 on BSE on Friday, is up 12.08 percent in 2023 so far.
Most analysts have remained optimistic, expecting the stock to gain another 15-30 percent from the current level.
In an investor meeting Thursday, the company shared its aspirations to increase market share to 35 percent in M&HCV and 25 percent in LCV in the medium term on the back of product launches, network expansion, differentiated aftermarket solutions and increased customer connectivity. .
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is reading: Ashok Leyland is putting in place a medium-term plan to boost share across its truck and bus segments
Reasons for the sharp rise in share prices also include ALL’s plans to roll out autonomous electric terminal trucks for the port industry. There have also been reports recently of the company joining the race for a stake in MG Motor India.
Exhilarated in the world of electric cars
What also works for Ashok Leyland is the promise of the company’s EV arm, Switch Mobility. The electric vehicle business will see good growth and Ashok Leyland will continue to invest in the company. It plans to launch several products in this segment in FY24 and beyond, said a report by Prabhudas Lilladher.
Commenting on the intraday rally, Abhishek Jain, Head of Research, Ariane Capital, said: Business lineThe commercial vehicle segment, in which the company operates, is seeing rapid changes and growth opportunities. The increasing average life of trucks and the demand for alternative vehicles, along with the company’s plans to transition towards alternative fuel engines, has positioned Ashok Leyland well in the market.”
Management’s comments and guidance prompted brokerages like Motilal Oswal, Prabhudas Lilladher, Elara Securities, JM Financial, InCred Equities and others to remain bullish on this stock.
Gaurav Bissa, Vice President, InCred Equities noted that Ashok Leyland has failed to enjoy buying interest over the past few months, and has been consolidating between ₹135 and ₹155 for much of 2023. The stock gave a breakout from that range some time ago, paving the way To move towards levels of 170 t. This continuation pattern can then push the stock towards $200 levels in a short period of time.”
Peer performance
Aditya Welekar, Senior Research Analyst – Metals & Automotive, Axis Securities said, “With a view to enhancing MHCV/LCV market share, focusing on cost, automation, new launches and optimizing product mix, its target in FY24 and in the medium term is to achieve Double-digit EBITDA margin and “teen average” of 8.1% in FY23. The entire CV segment grew a solid 34% year-over-year in FY23 (Travel & Tourism grew 49% and value added by 27 per cent year-on-year in FY23.ALL’s market share in MHCV improved to 32.3 per cent in FY23 from 26.8 per cent in FY22, while Tata Motors share decreased to 49.6 per cent in FY23. 54.12 percent in FY22.
ALL’s performance is remarkable, said Jain of Arihant Capital, and its valuation is relatively cheaper compared to peer group stocks. Eicher Motors, a major competitor, has performed decently, but Ashok Leyland’s market share gains and growth potential in the M&HCV and LCV segments provide a competitive advantage. ALL’s focus on technology transformations and the goals of ESG and its subsidiary Switch Mobility strengthen its position in the market.