Buy Ashok Leyland, target price Rs 98: Edelweiss

Edelweiss has given a buy rating to Ashok Leyland with a target price of Rs 98. The share price moved down by 1.15 per cent from its previous close of Rs 91.05. The stock’s last traded price is Rs 90.

Ashok Leyland Ltd., incorporated in the year 1948, is a Large Cap company (having a market cap of Rs 26405.07 Crore) operating in Auto sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 3852.84 Crore, up 160.30 % from last quarter Sales of Rs 1480.16 Crore and down -23.45 % from last year same quarter Sales of Rs 5033.06 Crore Company reported net profit after tax of Rs -96.32 Crore in latest quarter.

Investment Rationale
The brokerage likes AL’s efficient manufacturing and sound balance sheet (ex-vehicle financing business). It is building in a modest volume recovery, providing room for surprise. It maintains ‘BUY/SO’ with a TP of INR 98 (15x March2022E EV/EBITDA and INR7/share for financing business). The stock is trading at FY21/22E EV/EBITDA of 33.6x/11.2x

Promoter/FII Holdings
Promoters held 51.5 per cent stake in the company as of June 30, 2020, while FIIs held 15.7 per cent, DIIs 14 per cent and public and others 18.8 per cent.