Ashok Leyland shares rise 2% post Q1 results. What Citi and Nomura suggest

Shares of commercial vehicle major Ashok Leyland were trading 2.15% higher at Rs 175.35 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.

Consolidated revenue increased 10% to Rs 10,750 crore during the quarter under review. On a standalone basis, the company posted its highest-ever net profit of Rs 609 crore, up from Rs 594 crore in the year-ago quarter. However, the EBITDA margin declined to 10.1% from 11.1% in the same period last year, due to rising material costs.

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“The company has delivered another strong quarter, underpinned by disciplined execution and effective cost management,” said Dheeraj Hinduja, Chairman of Ashok Leyland. He added that demand across key segments remained robust and future prospects continue to be encouraging.

Hinduja also said government initiatives such as Parivartan would further accelerate fleet modernisation and support the long-term growth of the commercial-vehicle industry.

Ashok Leyland share price: Buy, sell or hold?

Citi maintained its Buy rating on Ashok Leyland while lowering its target price to Rs 200 from Rs 205. Q1 revenue rose 10% YoY to Rs 29,630 crore, while EBITDA and PAT came in ahead of estimates. Gross margin at 28.5% was a positive surprise despite commodity cost pressures. Management expects high-single-digit MHCV growth, while the inventory build-up aided Q1 but could unwind and pressure margins in Q2. Citi said new high-payload models could support market-share gains, although commodity inflation and competition pose pricing risks.

Nomura retained its Neutral rating on Ashok Leyland with a target price of Rs 194, implying 13% upside. The brokerage said the company's first-quarter results were broadly in line and expects steady performance to continue, with a healthy demand outlook and margins likely to improve.

It highlighted the strong gross margin performance despite steep cost pressures. Industry demand has recovered after a brief pause following the Middle East conflict, and Nomura estimates 8% MHCV growth in FY27F. Rising freight rates suggest the upcycle will continue, although most of the growth is expected to be front-ended in FY27F, with 18% growth in the first half and 2% in the second half. Nomura maintains its view that the commercial vehicle industry will be able to pass on cost pressures through pricing.

Choice Institutional Equities retained its Buy rating on Ashok Leyland with a target price of Rs 195. The brokerage said management expects high-single-digit MHCV and LCV volume growth in H2FY27E, supported by resilient replacement demand, though higher diesel prices and commodity inflation remain near-term risks.

Price hikes have offset around 50% of raw-material inflation, while the “Achieve 2K” programme is expected to support savings in H2FY27E. The brokerage believes Ashok Leyland remains well positioned for sustained growth, supported by market-share gains, diversification and lower structural break-even levels, but cautioned that commodity inflation and fuel-price volatility could weigh on near-term margins and earnings momentum.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)