Ashok Leyland shares are in focus after Citi Research raised its volume and earnings estimates for the commercial vehicle (CV) maker, citing a broad-based improvement in industry demand. In its latest note dated January 21, Citi maintained a 'Buy' rating and raised the target price to Rs 205 from Rs 165 earlier, implying an expected total return of about 15% including dividends.
The brokerage said it has increased its volume estimates for Ashok Leyland, driven by a sharp uptick in medium and heavy commercial vehicles (M&HCVs) and a better-than-expected performance in light commercial vehicles (LCVs).
M&HCVs Do the Heavy Lifting
According to Citi, domestic M&HCV truck volumes rose 25% year-on-year in the third quarter of FY26, marking a sharp improvement from the low-teens growth seen over the past year. Freight demand remains steady, supported by healthy freight rates.
While the direct impact of GST cuts on truck demand may be lower compared to passenger vehicles or two-wheelers, Citi noted that the overall increase in goods movement is acting as a positive driver.
The brokerage also pointed to stricter emission norms in the Delhi-NCR region, related to BS-IV trucks, which could accelerate replacement demand. Over the longer term, sustained freight availability and a shift toward cleaner vehicles may further support M&HCV demand.
Bus Volumes Steady, Market Share Gains
Bus volumes for Ashok Leyland have shown steady growth, reflecting demand from state transport undertakings (STUs) and private operators. Citi highlighted that Ashok's bus volumes have grown faster than the industry, aided by a 160 basis-point improvement in market share over the past year.
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LCVs Surprise on the Upside
LCV volumes, which had been a laggard, surprised positively in the December quarter. After a weak first half of FY26, domestic LCV volumes surged 22% quarter-on-quarter in Q3, helped by GST-linked consumption recovery.
For FY26, Citi now expects LCV volumes to grow up to 11% year-on-year, with Ashok Leyland's market share holding flat.
Citi raised its FY26-28 EBITDA estimates by 5-11%, with higher upgrades for LCVs. Reflecting the improved demand outlook, the brokerage increased its target EV/EBITDA multiple to 18x from 16x earlier, underpinning the revised target price of Rs 205.
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