Shares of Ashok Leyland Ltd. fell the most in nearly two months after Credit Suisse downgraded the automaker, citing poor recovery of commercial vehicle sales.
The Swiss research firm lowered its rating on the stock to ‘neutral' from ‘outperform', and cut its 12-month target price to Rs 114 from Rs 161, implying a 6% downside from Thursday's closing price.
“Our survey of 630 truck operators from mid-May to early June in states that contribute 47% of India's GDP shows evidence of the second Covid-19 wave hitting profitability, affecting their ability to service loans,” Credit Suisse said in a note. Only 18% of operators stated their intent to buy a truck in the next three months, it said.
Besides, Credit Suisse said its proprietary freight demand-supply model indicates fleet utilisation is still down at 62% in June. “Truck sales recovery is likely to begin only in October with the festive season, when utilisation is expected to bounce back to around 75%.”
Ashok Leyland's medium and heavy commercial vehicle inventory is high and discounting remains aggressive, the research house said, while it cut its earnings per share forecast for the auto company by nearly 65% for FY22.
Shares of Ashok Leyland dropped as much as 6.31% to Rs 113.55, the lowest in a month. The stock extended its losing streak to five days, making it the worst run since March. Of the 48 analysts tracking the stock, 33 have a ‘buy' rating, 11 suggest a ‘hold' and four recommend a ‘sell', according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 19.5%.
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