ADD Ashok Leyland; Target Of Rs 180 On Strong Margin Performance, Steady Volume Growth: Kotak Neo Research
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Shares of commercial vehicle major Ashok Leyland were trading 2.83% higher at Rs 176.50 on Monday after the Chennai-based automaker reported a 2% year-on-year (YoY) rise in consolidated net profit to Rs 668 crore for the quarter ended June, compared with Rs 658 crore in the year-ago period.
Ashok Leyland has retained an 'ADD' rating from Kotak Neo Research with a fair value of Rs 180, up from Rs 170 earlier. The valuation uses 18x September 2028E EPS for the core business, along with 2x FY28E book value per share for Hinduja Leyland Finance and 3x FY27E EV/sales for Switch Mobility, based on a sum-of-the-parts methodology. At the current market price of Rs 172, the fair value implies further upside.
Ashok Leyland's Q1FY27 results showed strong margin performance, with EBITDA coming in above estimates on the back of better-than-expected gross margins. Net revenue grew 10% year-on-year, in line with a 10% increase in volumes. EBITDA was 8.6% above estimates, while the EBITDA margin stood at 10.1%, 80 basis points ahead of expectations. Gross margin came in at 28.5%, 230 basis points above estimates. Adjusted profit after tax was 13.2% ahead of estimates, supported by the EBITDA beat.
Domestic MHCV market share, however, declined 170 basis points year-on-year during the quarter. Exports also fell 18% year-on-year to 2,461 units in Q1FY27, affected by logistical disruptions at the company's UAE assembly facility amid geopolitical tensions.
The commercial vehicle industry has continued to see healthy demand, although the company expects the pace of growth to moderate. Kotak Neo Research expects Ashok Leyland to deliver a volume CAGR of 5-6% over FY26-29E. Margins are expected to decline by 110 basis points year-on-year in FY27E due to multiple headwinds, before recovering in FY28E.
Ashok Leyland Q1 FY27 Results
Separately, Ashok Leyland reported a 2% year-on-year increase in consolidated net profit to Rs 668 crore for the June quarter, compared with Rs 658 crore a year earlier. Consolidated revenue rose 10% to Rs 10,750 crore.
On a standalone basis, the company reported its highest-ever net profit of Rs 609 crore, compared with Rs 594 crore in the year-ago period. The EBITDA margin, however, declined to 10.1% from 11.1%, primarily due to higher material costs.
Chairman Dheeraj Hinduja said the company delivered another strong quarter, supported by disciplined execution and cost management. He added that demand across key segments remained robust and that the outlook continued to be encouraging. Government initiatives such as Parivartan, he said, could further accelerate fleet modernisation and support the long-term growth of the commercial vehicle industry.
On a sequential basis, consolidated revenue declined to Rs 13,069.59 crore in the June 2026 quarter from Rs 17,246.44 crore in the March 2026 quarter. Net profit fell to Rs 661.63 crore from Rs 1,346.73 crore, while EPS declined to Rs 1.05 from Rs 2.20.
At 2:33 pm, shares of Ashok Leyland were trading at Rs 176.50, up 2.83% on Monday, August 17.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto is a business journalist with 8+ years of experience in financial journalism. She covers equity markets, corporate earnings, IPOs, commodities and the economy.
As a reporter with leading business publications, she has tracked financial markets and covered sectors including banking and financial services, retail, consumer goods, advertising and e-commerce.
Outside work, she enjoys travelling, discovering local cultures and spending time in nature.
