Emkay Global Financial's report on Ashok Leyland
Q4FY20 results were weak due to lower volumes, but came in above estimates. Revenue fell by 57% yoy to Rs38.4bn, above estimates of Rs33.7bn, owing to higher-than-expected realizations and spare part revenues. EBITDA margin contracted 640bps to 4.8% (est. 4.5%). Led by the lockdown and expectation of a gradual pickup in demand, we cut FY21E volume by 25%, but broadly retain FY22 volume forecast. We expect recovery from Q4FY21E onwards led by the low base, replacement demand and gradual improvement in economic activity. AL is likely to gain share in domestic MHCVs from 32% in FY20 to 33% in FY22E, led by new products based on the modular platform. Similarly, market share will increase from 9% in FY20 to 15% in FY22E, led by new product Phoenix LCV in 2.5-4.9T segments.
Outlook
We expect 14%/32% CAGRs for revenue/EBITDA over FY20-22E. We retain Buy, with a TP of Rs74 (Rs76 earlier) based on 10x EV/EBITDA on FY22 estimates, and Hinduja Leyland Finance investment value at Rs9/share. In sector EAP, we have OW stance on the company.
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