Ashok Leyland shares surge 7% as UBS recommends 'buy'

Shares of Ashok Leyland surged nearly 7% on the NSE today, briefly touching a new all-time high mark of ₹248.89 as brokerage firms such as Nomura and UBS Global Research remain bullish on this commercial vehicle major, despite a slow start to FY 2024-25.

This Hinduja Group subsidiary saw a 41% decline in its quarterly consolidated net profits from ₹933.69 crore in Q4 of the previous fiscal to ₹550.65 crore in Q1 of this fiscal year, last year in the same period the company had reported consolidated net profits of ₹584.49 crore. The company’s earnings per share has dropped from ₹1.85 in June last year to ₹1.73 in June this year.

Nomura maintained its 'Buy' rating on Ashok Leyland today, with a target price of Rs 247. UBS Global also upgraded the rating to ‘buy’ for the company, setting a price target of Rs. 280.

The commercial vehicles major however, managed to maintain a positive 4.46% yearly growth in its revenue from operations, reaching a consolidated revenue of ₹10,724.49 crore for the April-June 2024 period, up from ₹9,691.32 crore in the same period last year.

Financial analysts expect a potential uptick in the company’s electric vehicle business. “Through our Electric Vehicle subsidiary, Switch Mobility, we are geared to participate in the growing EV market with a clear road map. The launch of IeV3 this month, the second e-LCV launch by Switch, will further strengthen our position in this market,” says Dheeraj Hinduja, Chairman of Ashok Leyland.

Market sentiment was buoyed by strong demand across all business units, particularly in the commercial vehicle segment, which reached a record 43,893 units, up from 41,329 units in the previous year. The domestic medium and heavy commercial vehicle segment saw 8% growth, with market share rising to 30.7%. The market share of the bus segment also grew to 33.3%. In the domestic Light Commercial Vehicles category, volumes rose to 15,345 units, a 4% increase from 14,821 units in Q1 FY'24. The commercial vehicles segment reported revenue of ₹9,301.73 crore, up from ₹8,657.19 crore in the same quarter last year. Export volumes increased 5% to 2,324 units from 2,222 units in the previous year.

Other segments including Power Solutions, Aftermarket, Defence business and the company’s International Operations contributed significantly to the revenue growth.

“The non-CV businesses also have grown substantially. While we continue to expand our market penetration on the back of efficient products and network expansion, we shall remain acutely focused on achieving midteen EBITDA in the medium term,” said Shenu Agarwal, MD & CEO of the company.