Can Ashok Leyland Sustain Its Rally After a 27% Surge Since November?
Current Stock Performance
– Closing Price: As of Tuesday, Ashok Leyland’s stock closed at ₹186 on the BSE.
– Target Price: This exceeds the broking firm’s target of ₹160, potentially leading to profit booking in the near term.
Sales Growth Highlights
– Strong Sales Volume: Shares of Ashok Leyland have reached near record highs, driven by impressive sales volume growth.
– Q3 FY26 Performance:
– Sequential Growth: Sales volumes rose by 17.3%.
– Year-on-Year Growth: Sales increased by 24.2%, totaling 57,625 units.
– Domestic Sales: Up by 24.6% year-on-year to 52,660 units, outperforming the sector’s 20.7% growth.
Outlook for FY26
– Optimistic Projections: The company anticipates that the second half of FY26 will show improved performance compared to the first half.
– Objectives:
– Lower tax rates and heightened infrastructure activity are expected to boost results.
– Capacity is being ramped up to meet the rising demand.
Export Goals
– Ashok Leyland aims to escalate its FY26 export volume by 20% year-on-year to 18,000 units.
– The company plans to maintain this growth rate for the next two to three years, targeting escalation to 25,000 units.
Electric Vehicle (EV) Ambitions
– The company is on track to make its EV unit, Switch Mobility, profitable, having reached break-even at the EBITDA level in the first half of FY26.
– A significant investment of around ₹5,000 crore over the next decade is earmarked for battery development and manufacturing.
– A partnership with China-based CALB Group will facilitate battery production in India.
Capacity Expansion
– The Lucknow plant is set to start operations soon, and ramp-up at the Andhra Pradesh facility will increase bus body-building capacity to over 20,000 units from the current 12,000 units.
– Current light commercial vehicle (LCV) production capacity is 80,000 units, with plans to expand to 110,000-120,000 units within 6-9 months based on demand.
Financial Projections
– Updated Estimates: Emkay Global Financial Services has revised its revenue estimates upward by 3-7% and earnings per share (EPS) targets by 6-10% for FY27 and FY28, citing improved growth prospects.
Conclusion
While Ashok Leyland is riding a wave of positive momentum with a 27% surge since November and high sales volume growth, its current stock price above the target price raises questions about short-term profit booking. The company’s focus on expanding EV production and enhancing manufacturing capacity positions it well for sustained growth. Investors will be keen to see if Ashok Leyland can maintain its performance in the coming quarters, fueled by robust demand, innovative technology, and strategic partnerships.