ICICI Direct's research report on Ashok Leyland
Ashok Leyland (ALL) reported an operationally strong Q4FY21 performance. Net sales came in at Rs 7,001 crore (up 82.4% YoY, 45.4% QoQ), with ASPs climbing 10.3% sequentially to Rs 15.9 lakh/unit amid share of M&HCV within overall volumes rising to 60% vs. 50% in the previous quarter. Total volumes were at ~44,060 units, up ~31.9% QoQ. EBITDA margins were at 7.6%, up 236 bps QoQ despite ~250 bps gross margin contraction as the company realised substantial operating leverage benefits. Consequent PAT amounted to Rs 241 crore vs. loss after tax of Rs 19 crore in Q3FY21.
Outlook
Volumes, sales CAGR are seen at 27%, 31%, respectively, in FY21P-23E. Healthy medium-term demand prospects along with market share gain possibilities and structural margin-accretive factors help us retain our BUY rating on ALL. We value it at an unchanged SOTP based target price of Rs 150 (15x CV business FY23E EV/EBITDA, 2x P/BV for investments).
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