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Anand Rathi Report
Surpassing our Rs 9.2 billion estimate on the better-than-expected gross margin, Ashok Leyland Ltd.'s Q2 Ebitda slipped 6% yoy to Rs 10.2 billion. We expect India's medium and heavy commercial vehicle sector to turn positive with 6% growth in H2 and clock a 7% CAGR over FY25-27, led by robust bus demand (an 8% CAGR), continuing replacement demand (refer fig 8), infra/economic activity (order awarding is robust) and the favorable base.
Exports would record a strong 12% CAGR, led by recovery in Africa/Asia and the low base. The Ebitda margin would rise due to the greater focus on profit (similar to peers) and the tonnage mix.
We introduce our FY27e, with 11%/14%/17% revenue/ Ebitda/PAT growths. Valuations are reasonable at 18 times FY26e/15x FY27e. We retain a Buy with a target price of Rs 290, 13 times FY27e EV/Ebitda (earlier Rs 290, 13 times FY26e) and Hinduja Leyland Finance at Rs 11/share.
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