Ashok Leyland Q4 Review: Margin Beat Lifts Sentiment Amid Mixed Demand Outlook

Ashok Leyland Ltd.’s fourth quarter results came in ahead of expectations, primarily driven by strong gross margin expansion and operational efficiency. While brokerages differ in their opinions on valuation, most agree the truck-maker is entering a stronger phase operationally, with improving margins and a clearer roadmap for long-term growth.

Standalone net profit rose 38.4% year-on-year to Rs 1,246 crore in three months ended March 2025, even as revenue increased 5.7% to Rs 11,907 crore, according to an exchange filing on Friday. Analysts polled by Bloomberg had estimated the top line at Rs 12,065.5 crore and a bottom line of Rs 1,100 crore.

Margin was up 100 basis points at 15%, which was 104 basis points ahead of CLSA's estimate. According to the brokerages, profit was aided by a lower tax rate and better cost control. Gross margin improved to 29.4% on the back of a richer product mix, including 15% growth in spares and 9% in engine revenue.

CLSA upgraded the stock to ‘Hold’ from ‘Underperform’ and raised its target price to Rs 225 from Rs 190, citing strong margin execution and improved medium-term outlook. It still expects a 5% medium and heavy commercial vehicle volume decline in fiscal 2026, citing cost headwinds from steel safeguard duties and AC cabin regulations, but sees recovery from financial year 2027 onward.

Nomura maintained its ‘Buy’ rating and hiked its target price to Rs 275 from Rs 250, expecting a pick-up in replacement demand and MHCV volume growth of 5% in fiscals 2026 and 2027. It sees a 15% earnings CAGR over financial years 2025–27, driven by favourable macro trends, disciplined pricing, and strong government infrastructure push.

Citi also maintained a ‘Buy’ with a target price of Rs 290 up from Rs 270, citing better-than-expected gross margins and improved cost management. The brokerage expects broad-based commercial vehicle volume growth in financial year 2026. It emphasised Ashok Leyland’s focus on diversifying beyond the cyclical MHCV segment, including exports, defense, and power solutions.

Macquarie remained cautious, maintaining a ‘Neutral’ rating with a target price of Rs 234. It acknowledged the margin beat and near-term demand tailwinds, but highlighted risks around valuation and volume visibility.

Ashok Leyland is also expanding into electric mobility. Switch Mobilitiy posted double-digit Ebitda margins in the quarter ended March and aims for profit-positivity in financial year 2026. Ohm Mobility plans to scale its EV bus fleet to 1,700 units in financial year 2026.