Credit Suisse maintains underperform rating on Ashok Leyland

MUMBAI: Credit Suisse has maintained its underperform rating on Ashok Leyland with a target price of Rs. 77 citing that it expects CV volumes to disappoint going forward. Further, it said GST implementation is an additional medium-term risk as it frees up freight carrying capacity.

The brokerage said that upon meeting Mr Hanish Yadav, Ministry of Railways, it became clear that there is a focus to make railways gain share from roads. It said the target could go up from current 31% to 45% in 5-7 years.

Credit Suisse said that some of the key recent measures taken by the railways are improving competitiveness by reduction of select freight rates (for the first time in history), improving reliability by offering time-table trains and raising average freight speeds (5 kmph every year) and so on.

Further, the brokerage stated that cement companies have indicated that road has been forced to cut freight rates in order to match the reduction by railways.

It pegged P/E at 18.0x FY2017 and 16.2x FY2018 estimated earnings. Ashok Leyland rose 1.91% to Rs. 88.05 on Friday.