The main motive for such low curiosity amongst traders was the drop in gross sales of business automobiles with no restoration in sight until October. However November knowledge confirmed some development and which will change every part now, analysts mentioned.
Other than the bettering gross sales knowledge, analysts anticipate alternative demand for two,00,000 models in FY22. In addition to, there may very well be robust restoration in volumes of medium and heavy industrial automobiles (MHCV) within the coming years, and which will put Ashok Leyland in a primary place to learn from it.
“Ashok Leyland is uniquely positioned to learn from a cyclical upturn, as the corporate has robust presence within the 25-tonne classes and its differentiated fashions supply comparatively decrease price of possession. These components ought to assist take the corporate’s MHCV market share to a excessive of 34 per cent by FY23,” mentioned Raghunandhan NL, an analyst at Emkay International.
He mentioned ALL’s gentle industrial car (LCV) enterprise appears set to broaden the addressable market share, which stood at 34 per cent of the market in FY20, and at 50 per cent presently. It ought to enhance to 65 per cent over the subsequent two years.
Emkay has a ‘purchase’ suggestion on the inventory with a 12-month goal value at Rs 124, which implies an upside of 33 per cent from final shut. The brokerage additionally expects a mean annual free money stream of about Rs 1,000 crore for subsequent three years, resulting in an enchancment within the internet debt-equity ratio to 0.1 instances in FY23 from 0.three instances in FY20.
Shares of the corporate have added about 14 per cent over final 11 months, however have surged by a good-looking 175 per cent from their March lows, most of which got here in final three months. It’s among the many 12 stocks from auto house which have doubled traders’ wealth since then.
In November, the corporate reported a 5 per cent rise in complete industrial car gross sales at 10,659 models. Whole heavy and medium industrial car gross sales slipped 14 per cent to five,114 models from the year-ago month, whereas gross sales of sunshine industrial automobiles rose 32 per cent to five,545 models.
Prospects of the industrial car business are extremely aligned to GDP development, which companies say goes to enhance considerably from subsequent fiscal, particularly when it would come on a low base.
The continuing financial restoration and elevated focus of the federal government on infrastructure augur nicely for the expansion prospects of the CV business.
Additional, the elevated desire in the direction of the hub and spoke mannequin bodes nicely for the LCV business which has proven first rate restoration in latest months,” mentioned Rohit Khatri, an analyst with Religare Broking.
He additionally sees Ashok Leyland as a significant gainer from this restoration and has a value goal of Rs 105 on the inventory. This implies an upside of 12 per cent.
“We anticipate Ashok Leyland volumes to recuperate led by revival within the CV business as the corporate’s portfolio is extra skewed in the direction of excessive tonnage automobiles which might profit extra throughout upcycle within the CV business,” Khatri mentioned.
BP Wealth final month mentioned scaling up its non-truck companies which incorporates spare elements, exports, protection and energy options will decrease the impression of core enterprise cycle volatility, counting it as one other optimistic for the agency.
It sees the inventory at Rs 104 in 12 months’ time.
Publicly out there Reuters Eikon database exhibits extra analysts at the moment are bullish on the agency. In comparison with three months in the past when 24 analysts had ‘purchase’ or ‘outperform’ calls on Ashok Leyland, it now has 28 such calls now.
Simply three analysts are bearish on it with both ‘promote’ or ‘underperform’ score.