“BUY” this mid-cap auto stock with a target price of Rs. 137 says Geojit

The brokerage’s perspective on Ashok Leyland Ltd

The brokerage firm in its research report noted that “the company’s revenue at T2FY22 increased by 51% QoQ (not comparable) due to the production lockdown in relation to the pandemic. We expect demand to rise. ‘will improve in the future due to the recovery in construction activity, improved retail sales and strong e-commerce activity. A respite in the price of steel at current level, better management of costs and price escalation will increase with margin.In the second quarter, AL’s market share in the truck segment was 22% versus 27% sequentially due to the reduction in discount . “

According to Geojit, “For the quarter, the heavy-duty segment grew 53% QoQ in volume and the light-duty segment doubled in volume. The bus segment is expected to recover in the short term due to the easing of restrictions. The average volume of buses in the industry amounted to 1/4 of an annual production of 40,000. AL is really poised to gain market share in this segment with its new models in Avatar (ICV, plate- modular form) and CNG models launched in the fourth quarter.

Buy Ashok Leyland Ltd with a target price of Rs. 137

Buy Ashok Leyland Ltd with a target price of Rs. 137

Geojit stated in its research report that “the company has been successful in gaining market share with products like Dost and its variants like Bada Dost, Avatar and Partner models, which has given its competitors a hard time. In addition, the company has embarked on a modular platform strategy to reduce the number of parts per vehicle. This could lead to better economies of scale, production planning and better supply chain management to lower the cost of the vehicle.

Ashok Leyland has increased its market share to 23.8% in the LCV segment. The growth trend in the LCV segment must continue as the industrial opportunity of LCVs is 5 times greater than that of LCVs. The company is poised to expand its market in the North, Northeast and the ASACR region, ”added the brokerage.

According to the brokerage’s call, “We believe the short-term headwinds have factored into the share price and do not expect a significant drop as volumes are currently at their highest. low and gradually recovering thanks to improving basic economic indicators. We appreciate AL at 15x EV / EBITDA on FY23E and reiterate our buy rating with a target of Rs.137. “

Disclaimer

Disclaimer

The stock was selected in the brokerage report of Geojit Financial Services Limited. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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