Shares of Ashok Leyland, a consensus buy, may have more steam left despite rallying 14 per cent in the last one month. A lower base due to one-off gain in the year-ago quarter led to a 17 per cent drop in the truck maker's March quarter results, but the numbers were better than Street estimates. Operating leverage and higher gross margins led to a first double-digit Ebitda margin in 15 quarters. While most brokerages are yet to come up with their fresh targets post Q4 results, the initial reports suggest the results were good and hint at upside potential for the stock.
The stock was trading 0.30 per cent higher at Rs 152.60. It trades at 9 times EV/Ebitda and 3.6 times P/BV on FY25 estimates. The scrip has 26 'Strong Buy' calls and five 'Buy' calls and no ‘Sell’ call, data publicly available with Trendlyne suggested.
Nomura India said Ebitda margin for Ashok Leyland at 11 per cent, up 210 bps QoQ, was in line with its estimate of 11.1 per cent but higher than consensus estimate of 10.3 per cent, leading to 7 per cent Ebitda beat and 13 per cent PAT beat. This brokerage likes Ashok Leyland shares as it sees the company to outperform industry in teh ongoing CV cycle. Besides it sees further improvement in net realisations as competitive intensity stays benign.
"We value AL at 12 times FY25 EV/Ebitda multiple. Current valuation at 9 times FY25 EV/Ebitda (adjusted for subsidiaries) is attractive, in our view, as we expect Ebidta to grow at 25 per cent CAGR over FY23-25," the brokerage said while suggesting a target of Rs 184.
JPMorgan has maintained its overweight stance on the stock with a target of Rs 175. Higher-than-estimated staff costs were offset by lower ‘other expenses’, supporting Ebitda margin expansion, Motilal Oswal Securities said while suggesting a 'Buy' on the stock. The domestic brokerage said lower interest costs and higher ‘other income' boosted adjusted profit for Ashok Leyland.
"Ashok Leyland reported healthy set backed by sharp improvement in Ebitda per vehicle by 2.2 times YoY (up 27.5 per cent QoQ) at Rs 213.7K and continues to outpace ours/Street consecutive for third quarter. MHCV volumes to grow healthy in FY24E, the impact of interest rate hike to be key to watch for," it said while suggesting a price target of Rs 175 for the stock.
Ashok Leyland has scheduled a conference call at 2.30 pm later in the day.
Also read: Hindalco to share Q4 results today. Profit may drop 35-43% YoY; all eyes on Novelis performance