East India Securities recommended hold rating on Ashok Leyland with a target price of Rs 63 in its research report dated August 13, 2020.
East India Securitie's report on Ashok Leyland
Ashok Leyland’s (AL) 1QFY21 results were the reflection of the toll on the economy due to pandemic, however, we believe things have bottomed out in the industry with almost every macro indicator flashing signs of improvement. LCVs are already seeing a healthy recovery. Ashok Leyland’s much awaited upcoming LCV range can support the company to outperform the industry growth and will further de-risk its portfolio. On the margin front, the company has adopted constructive cost reduction strategies, which is helping in lowering the breakeven levels further and will show superior margins during the recovery period. We believe the current phase is only a pause and one quarter is nothing but a ‘dot’ in the history of long-term growth. However, in the recent past, the stock has run-up & we believe most of the near term positivities are priced in the stock and hence, it is trading at a fair value.
Outlook
We recommend ‘Hold’ with a target price of Rs 63 per share (9.0x FY22e EBITDA + Rs 14 per share value in Hinduja Leyland Finance).
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