Ashok Leyland Gets Target Price Hike As Analysts Anticipate Green Shoots In Q4

After posting a more than 30% growth in profit in the third quarter, Ashok Leyland got a double target price hike. The brokerages have cited expansion, strong order book and a positive outlook for the coming quarter.

The company’s consolidated net profit has risen 31% year-on-year to Rs 761.74 crore, from Rs 580.03 crore in the same period last year.

The commercial vehicle manufacturer reported a 2.2% increase in revenue, reaching Rs 9,436.17 crore, compared to Rs 9,231.06 crore in the previous year. The company’s earnings before interest, taxes, depreciation, and amortisation also saw a notable rise of 9%, amounting to Rs 1,168.93 crore, up from Rs 1,071.98 crore. The Ebitda margin improved to 12.4% from 11.6%.

Macquarie maintains its 'neutral' stand on Ashok Leyland after hiking the target price to Rs 226. Margin-led EBITDA beat the estimates. The management highlighted that the fourth quarter is set to see a steady pick-up in growth.

They also expect demand to improve further on the back of improving macro. This is supported by lower rates that are available to the company. The brokerage believes it could benefit from demand surprise in the commercial vehicle segment along with steady margins.

Macquarie also notes that the company's e-bus is seeing strong traction. This is further supported by a strong order book for the segment. It also notes that a nominal cost escalation is set to come in due to the new requirements.

Bank of America maintains 'buy' on Ashok Leyland with a Rs 10 price hike to Rs 260. The brokerage notes a significant cost improvement in the third quarter. The results also mark the 8th straight quarter of margin beats and the outlook on the fourth quarter seems to be positive.

BofA notes that there are green shoots in the diesel consumption segment and there are also opportunities with increased government capex. It also notes that the company has been expanding beyond its core business of trucks into other segments.

The company's export strategy is also noted to be improving.