CLSA retains sell on Ashok Leyland, lowers target price to Rs 40

CLSA has retained sell rating on Ashok Leyland in the ling term and lowered target price to Rs 40 from Rs 50. The stock ended up 1.3% at Rs 63.70 on Wednesday while the BSE Sensex closed 125.37 up at 37,270.82.

Company Financials

For the quarter ended 30-06-2019, the company has reported consolidated sales of Rs 6514.73 crore, down -33.20 % from last quarter sales of Rs 9752.98 crore and down -7.51 % from last year same quarter sales of Rs 7043.96 crore. The company has reported net profit after tax of Rs 273.87 Crore in latest quarter.


Investment Rationale

The slowdown in the Indian truck industry has intensified in recent months; not only the downturn will persist but also see risk of an elongated cycle, said CLSA. In the past two truck downcycles, which lasted 27-28 months, Given that the current downturn is only 10 months long so far and the stock is still trading at 2 times price-to-book, it is too early and the stock is too expensive to call for a bottom, said CLSA.