Brokerages optimistic in Ashok Leyland shares after Q4 numbers, expect up to 40% rise; here's why
On the back of healthy revenue and volumes coupled with sharp improvement in EBITDA margins, brokerages are optimistic in Ashok Leyland's share price. They see between 16% to 40% upside in this auto stock going ahead.
PremiumStock price of Ashok Leyland witnessed a downside on Wednesday after its Q4 numbers. The decline in shares come after Ashok Leyland posted a 17% drop in its profitability. However, the company posted better performance in case of revenue and EBITDA margins. Brokerages are optimistic about Ashok Leyland stock and have recommended buying. A potential of up to 40% is likely in this auto stock.
On BSE, Ashok Leyland's stock price closed at ₹150.30 down by 1.22%. The stock touched an intraday high and low of ₹155 apiece and ₹148.30 apiece respectively.
In Q4FY23, Ashok Leyland posted a net profit of ₹751.4 crore down by 16.6% YoY. But revenue climbed by 33% YoY to ₹11,625.7 crore on strong volumes growth. EBITDA was also healthy to ₹1,275.7 crore in the quarter, soaring by a whopping 64.4% YoY. EBITDA margins also expanded by 210 bps YoY to 11% in Q4FY23.
Himanshu Singh – Research Analyst, Prabhudas Lilladher said, "Volumes grew QoQ by 25.5%, and YoY by 22.5%, and was flattish vs PLe at 0%," adding, "Revenue grew QoQ by 28.7% to ₹116 billion, and YoY by 33%, and was flattish vs PLe at -0.4%."
Further, Singh added, "EBITDA grew QoQ by 60% to Rs. 13 billion, and YoY by 64.4%, and grew vs PLe at 9.2%." Further, APAT grew QoQ by 111% to Rs. 08 billion, and YoY by 36.9%, and grew vs PLe at 10.4%. And also EBITDA margin expanded QoQ by 214 bps to 11.0%, and YoY by 210 bps, and expanded vs PLe at 97.
Read here: Ashok Leyland records 17% drop in Q4 PAT but revenue soars 33% on healthy volumes; dividend declared
Meanwhile, Axis Securities in its note said, "Ashok Leyland reported a robust set of numbers for the quarter: Revenue for the company grew by 33/29% YoY/QoQ (inline) led by higher ASP (up 8.5%/2.6% YoY/QoQ) due to price hikes taken during the quarter and richer product mix (Total MHCV volume mix in Q4FY23 came in at 67.8% vs 65.7%/64.6% YoY/QoQ)."
In the case of operating profit, Axis Securities added, " EBITDA grew by 64%/60% YoY/QoQ, largely in line with our estimates (8.5% higher than consensus estimates) led by improved gross margins. The higher GM is due to lower commodity costs, price hikes, and richer product mix which was partially offset by higher other expenses."
Further, the brokerage's note added, ". EBITDA margins stood in line with our expectations at 11% (up 210/214bps YoY/QoQ) on account of higher operating leverage. Adj PAT at ₹712 Cr grew by 24%/100% on a YoY/QoQ basis but below our estimate by 9% on account of higher tax expenses (effective tax rate stood 33.7% against 9.7%/36.2% in Q4FY22/Q3FY23). The company has declared a final dividend of ₹2.60 per equity share; a payout ratio of ~60%."
Read here: Hindalco Q4: Firm declares dividend of ₹3, check details here
Coming to shareholders, the Chennai-headquartered company has declared a dividend of ₹2.6 per share having a face value of Re 1 each for the fiscal year FY23.
On valuation and recommendation, Axis Securities note said, ": We currently have a BUY rating on the stock with a TP at ₹175/share, valuing the stock at 19x its FY25 EPS."
While Prabhudas Lilladher analyst has maintained a Buy rating as well for a target price of ₹210 apiece.
Taking into consideration the current market price, Ashok Leyland's shares have a potential upside from 16.43% to 39.72% on BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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