Ashok Leyland expects volume growth and margin expansion to continue in FY24; Should you buy, hold or sell the stock-

Ashok Leyland expects volume growth and margin expansion to continue in FY24; Should you buy, hold or sell the stock?

Ashok Leyland expects its M&H CV volumes to grow by 8-10%, and LCVs by 4-5% in FY24 following their second-quarter results. The management also anticipates achieving a double-digit EBITDA margin, targeting mid-teens in the medium term. The share price of Ashok Leyland has surged over the last year, gaining 1.04% in the last five days, 14.55% in the last six months and 17.56% year-to-date.Should you buy, sell or hold Ashok Leyland shares?Jefferies

The brokerage retained the Buy recommendation on the stock and pointed out that they have “fine-tuned our FY24-26 EPS estimates. Our FY24-25E EPS are still 9-10% above Street. Stock is trading at a reasonable 4.3x FY25E PB vs last cycle peak of 5.8x. We retain our Buy with a price target of Rs220 based on 5.0x Sep-25E PB.”

Prabhudas Lilladher: Buy – Target Price: 210

“We believe Ashok Leyland is well placed to sustain its recent market share gains led by 1) strong demand for modular AVTR trucks, 2) network growth and 3) product launches. LCVs will benefit from filling of white space, growth in end markets and network growth. Price hike, benign input cost, operating leverage and cost control will lead to margin expansion (EBITDA margin +c390bps over FY23-26E). Maintain ‘BUY’ at Target Price of Rs 210 on Sep-25E EV/EBITDA of 11x (previous Target Price Rs 220 at EV/EBITDA of 12x) (includes Rs 12 for HLF) we reduce the multiple to factor in entry into mid-cycle for the CV industry.”

Axis Securities: Buy – Target Price: 205

“We remain positive on the long-term growth trajectory of the company with better margins led by operational efficiencies, material cost reduction program, softening of commodity costs, and pricing discipline, and expect 7% CAGR volume growth over FY23-26E. We forecast the company to post Revenue/EBITDA/PAT growth of 10%/20%/32% CAGR over FY23-26E. We maintain our ‘Buy’ rating on the stock with the Target Price at Rs 205/share (earlier Rs 210/share), valuing the stock at 19xSep’25E EPS (rollover from Jun’25E EPS), implying an upside of 18% from the CMP.”

Anand Rathi: Buy – Target Price: 225

“Broadly in line with our Rs10.5bn estimate, Ashok’s Q2 FY24 EBITDA surged 101% y/y to Rs 1080 crore. We expect domestic M&H CV volumes to record a 6% CAGR over FY23-26 from economic activity, replacement demand, the government thrust on infrastructure and buoyant demand for buses. The EBITDA margin would expand due to the greater focus on profit (similar focus seen at industry peers), better scale and tonnage mix. Introducing FY26 with Revenue/EBITDA/PAT growing 10%/11%/13%. Valuations are reasonable at 16x FY25/14x FY26. We maintain a Buy at a higher 12-mth Target Price of Rs 225, 11x FY26e EV/EBITDA (earlier Rs215, 12x FY25e) and Hinduja Leyland Finance at Rs9/sh.”

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