The company manufactures and sells commercial vehicles, including buses, trucks, engines for industrial and marine applications, forgings, and castings. Management aims to expand the product line and enter new markets, leveraging expertise in high-quality manufacturing to drive sustainable growth and profitability.
Ashok Leyland Ltd.
Ashok Leyland is the second-largest manufacturer of commercial vehicles in India and the fourth-largest manufacturer of buses globally. It is a flagship of the Hinduja group and has a long-standing presence in the domestic medium and heavy commercial vehicle (M&HCV) segment.
The company has a strong brand and well-diversified distribution and service network across the country and has a presence in 50 countries, it is one of the most fully-integrated manufacturing companies. Its headquarters is in Chennai.
Growth Guidance by Management
For FY25, Ashok Leyland has allocated a capital expenditure (capex) budget of Rs.750 crores. Additionally, the management anticipates investing between Rs.500 crores and Rs.700 crores in its subsidiaries during the same period.
Ashok Leyland’s domestic MHCV(Medium Heavy Commercial Vehicles) volume grew by 8 percent year-on-year, with the company holding a 30.7 percent market share.
Recent orders and developments
The bus segment saw a notable increase, with its market share reaching 33.3 percent. Ashok Leyland is aggressively advancing product excellence in e-buses and e-LCVs (Light Commercial Vehicles), with plans to introduce new buses aimed at the school and staff segments in FY25.
In the electric vehicle sector, the company has secured an order book comprising 550 buses for Delhi, over 300 for Bengaluru, and 100 for Uttar Pradesh for FY25. Furthermore, Ashok Leyland bags the Single Largest Order of 2104 Fully Built Viking Passenger Buses from Maharashtra State Road Transport Corporation.
Ashok Leyland, the top supplier of logistics vehicles to the Indian Army, has announced a major order worth Rs.800 crores in the defence sector. The contracts include the supply of Field Artillery Tractors (FAT 4×4) and Gun tow vehicles (GTV 6×6).
Growth Potential
The company identifies significant growth potential, currently serving only 50 percent of the addressable market, with plans to expand coverage to 80 percent. In FY25, the company plans to launch six new light commercial vehicles (LCVs).
Management anticipates significant advancements in engine technology, with the company already possessing 3-4 different families of engines and the capability to produce engines exceeding 215 horsepower without the need for external collaborations.
Ashok Leyland is establishing three Centers of Excellence focused on battery pack modules, electric drive units, and software-defined vehicular technology. These centers aim to enhance capabilities for EV trucks and reduce reliance on external component suppliers.
Ashok Leyland has invested Rs.5.99 crores in capital expenditure to prevent groundwater withdrawal by implementing improvements that conserve 2.77 lakh kiloliters per annum.
Stock Recommendations
In Friday’s trading session, the share price of Ashok Leyland Ltd. is currently trading at Rs.247.75 per share, down 0.88 percent from its previous close.
United Bank of Switzerland (UBS) has recommended Ashok Leyland to ‘buy’ with a target price of Rs.280, citing strong demand and better valuations compared to peers. The target price implies a potential upside of 20 percent.
UBS forecasts a medium and heavy commercial vehicle (MHCV) volume growth of 1 percent and 8 percent for FY25 and FY26 respectively, and expects EBITDA margins of 12.1 percent and 12.5 percent in those years due to pricing discipline in the commercial vehicle industry.
Goldman Sachs has a ‘buy’ rating on the Ashok Leyland stock with a target price of Rs.260 apiece. The target price implies a potential upside of 10 percent from the current level.
Financials
The company reported a 5 percent year-on-year revenue increase, reaching Rs.8,599 crore for April-June 2024, up from Rs.8,189 crore last year. Despite these gains, net profit decreased by 8.7 percent to Rs.526 crore from Rs.576 crore last quarter, due to a one-time tax impact from an exceptional item (EI).
Written by – Siddesh S Raskar
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