UBS Upgrade Keeps Ashok Leyland In The Black Despite Smaller Q1 Profit

Ashok Leyland shares were up 6% on Friday’s session even after the company’s profit fell 6% in the June quarter as UBS upgraded the stock.

What Happened: Ashok Leyland saw its net profit fall around 6% to ₹550 crore in the June quarter. Its operational revenue was up 5% to ₹8,599 crore, while EBITDA margin improved to 10.6% from 10% in the year-ago period. The company also registered its highest-ever commercial vehicle volumes of 43,893 units in the quarter.

Brokerage Views: UBS upgraded the stock to “buy” with a target price of ₹280 on better-than-expected industry demand, strong margin execution and more attractive valuations compared to peers. The stock is trading at par compared to its historical valuations while its peers are trading at 1-3 standard deviations higher than their valuations, the global brokerage said.

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The research firm forecasts a medium and heavy commercial vehicle (MHCV) volume growth of 1% and 8% for FY25 and FY26, respectively. It also expects a EBITDA margin of 12.1%, 12.5% in FY25 and FY26 respectively due to pricing discipline in the commercial vehicle industry. UBS expects robust demand for commercial vehicles due to strong economic growth and the government’s focus on infrastructure activities.

Nomura also made a “buy” call with a target price of ₹247. The company’s EBITDA margin was in line with expectations. The research firm said the key catalysts for the company will be improved commercial vehicle growth, double-digit EBITDA growth over FY25-26 and upside from the electric vehicle business.

Price Action: Shares of Ashok Leyland rose 6.05% to ₹246.50 on Friday’s session.

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