AL (ASHOKLEY) Shares Surge Post Q4 Earnings: Is Now the Time to Invest?

<ul>
  <li>Ashok Leyland share price gained nearly 3% on Monday as brokerages maintained their bullish view on the stock after the automobile major reported its Q4 results.</li>
  <li>The commercial vehicle (CV) manufacturer reported a net profit of ₹933.69 crore in the fourth quarter of FY24, registering a 16.73% growth from ₹800 crore in the year-ago quarter, led by strong demand.</li>
  <li>"We continue to be optimistic about our industry prospects in the short to medium terms backed by anticipated robust growth in the Indian economy," said Dheeraj Hinduja, Chairman, Ashok Leyland.</li>
</ul>
<p><strong>Ashok Leyland's Q4 results show strong growth, driving a positive outlook for the stock among analysts.</strong></p>
<h2><strong>Strong Financial Performance in Q4 FY24</strong></h2>
<p>Ashok Leyland reported consolidated revenue from operations of ₹13,577.58 crore in Q4FY24 as against ₹13,202.55 crore YoY. The results were backed by an all-round performance with contributions from all business verticals. In the M&HCV Bus segment, the company emerged as market leader with a market share gain of 5.8% points. Overall CV volumes at 194,553 units were very close to the previous high of 197,366.</p>
<h3><strong>Brokerage Views and Target Prices</strong></h3>
<p>Analysts have maintained their positive view on Ashok Leyland shares on the back of volume growth expectations, industry growth prospects, and cheap valuations. Here's what brokerages have to say about Ashok Leyland shares and Ashok Leyland Q4 results:</p>
<h2><strong>Motilal Oswal</strong></h2>
<p>Motilal Oswal expects a recovery in CV demand from 2HFY25 onwards as structural demand drivers remain intact. Ashok Leyland is the best investment choice in the CV growth cycle, as it has positioned itself to expand revenue/profit pools. Moreover, its focus on profitable growth driven by lower discounts, a better mix, and cost control measures should bode well for EBITDA margin expansion over FY24-26E. The brokerage raised its FY25E and FY26E earnings per share (EPS) estimates by 7% and 6% to factor in a better gross margin and a lower interest burden. It reiterated a ‘Buy’ rating on Ashok Leyland shares with a target price of ₹245 apiece.</p>
<h2><strong>Antique Stock Broking</strong></h2>
<p>In terms of demand, Antique Stock Broking expects the demand momentum to pick-up post the elections led by better macro conditions and replacement demand kicking in. Freight availability continues to remain strong and it expects the same to continue on the back of a strong capex cycle lying ahead. Further, any cut in interest rates can drive the demand significantly. Volume growth with sustained focus on profitability should augur well for earnings growth. The brokerage models a volume CAGR of 6% over FY24–26E. It revised FY25 and FY26 margin estimates by 120 bps and 70 bps and maintained a ‘Buy’ rating on the Ashok Leyland stock with a target price of ₹248.</p>
<h2><strong>Emkay Global Financial Services</strong></h2>
<p>Emkay Global Financial Services upgraded Ashok Leyland shares to ‘Buy’ from ‘Sell’ and raised the target price to ₹250 per share, on upcycle potential from FY26. The brokerage firm contends that after 2 likely flattish years (FY23-25E), the CV cycle may turn positive from FY26. Amid intact fleet operator profitability, it believes the pricing power/margin expansion for CV OEMs will sustain; this drives FY26E EPS up ~19%. Despite the 21% increase in stock price in three months, Ashok Leyland shares remain among the least-expensive OEMs.</p>
<h2><strong>Nuvama Institutional Equities</strong></h2>
<p>Factoring in better pricing and margins, Nuvama Institutional Equities increased FY25E and FY26E EBITDA estimates by 5% and 4%. After strong growth in domestic MHCVs over FY21–24 (49% CAGR), it forecasts a subdued volume performance in FY25, owing to a slowdown in government infra spends, increasing competition from Railways and a high base. The brokerage builds in a muted revenue and EBITDA CAGR of 2% and 1% over FY24–26E. It maintained a ‘Reduce’ call and increased Ashok Leyland share price target to ₹180 from ₹168 earlier.</p>
<h3><strong>Conclusion</strong></h3>
<p>The recent Q4 results of Ashok Leyland have reaffirmed the company's strong market position and growth potential. With positive outlooks from multiple brokerages and strategic initiatives in place, Ashok Leyland appears well-positioned for future growth. Investors should consider these insights and consult with certified experts before making any investment decisions.</p>