Ashok Leyland shares hit 52-week high; here's why

Shares of automobile major Ashok Leyland surged as much as 3.49% to hit a 52-week of ₹170.15 apiece on the BSE after the company partnered with Aidrivers to manufacture electric terminal trucks for the port industry.

On Monday, the scrip opened higher at ₹165.70 against the closing price of the previous session at ₹164.40. At the time of reporting, the share price of automobile heavyweight was trading 2.13% higher at ₹167.90. In contrast to this, the broader BSE Sensex was down 0.45% at 63,101. In the past two trading sessions, the share price has surged as much as 8%.

At the current share price, Hinduja Group-led Ashok Leyland trades 32.5% higher than the 52-week low of ₹128.35 touched on June 17 last year. The company’s market capitalisation stood at ₹49,297.58 crore with 14,67,915 shares exchanging hands higher than the two-week average of 7.01 lakh shares, at the time of reporting.

Through its partnership with Aidrivers, the company plans to address the net zero emission needs of the port industry. The inaugural fleet of vehicles is expected to start operations early next year. Through the partnership, the commercial vehicle heavyweight is aiming to develop the country’s first electric terminal truck.

"Ashok Leyland Limited constantly explores various opportunities including but not limited to newer technologies and tie-ups with relevant Companies. To this end, the company has partnered with ‘Aidrivers’ for producing autonomous electric terminal trucks to address the net zero emissions needs of the port industry. The company has communicated its readiness in the aforesaid area, which will enable the prospective customers to take note of and explore their options with the company," the company said in a statement. This is part of the company’s target of achieving carbon neutrality in operations by 2030.  

In its investors' meeting last week, the manufacturer of medium and heavy commercial vehicles said that it plans to triple the defence business revenue in the next three years. According to the company, the defence business revenue in the last five years stood at ₹400 crore. Its defence revenue business is likely to stand at ₹1,100 crore in the next three years, the company said.

In the next few quarters, the company plans to increase its market share to 35% from the present 32% in the medium and heavy commercial vehicle category. In the light commercial vehicle category, the company plans to have a market share of 25% from the existing 19%.

Moreover, the company is planning to expand its capabilities across the electric mobility segment through its subsidiaries Switch Mobility. The UK-based Switch Mobility is the EV (electric vehicle) arm of Ashok Leyland and caters to the company’s EV operations in India. The company is also aiming for a double-digit EBITDA (earnings before interest, tax, depreciation and amortization) in FY24.

Domestic brokerage firms have a positive outlook for Ashok Leyland with a revised target price. Analysts at brokerage firm Motilal Oswal have maintained a 'BUY' rating with a revised target price of ₹180. "The demand environment is expected to remain stable, supported by improving pricing power and steady RM (repetitive manufacturing) prices, which will drive strong earnings. Ashok Leyland is the best investment choice in the CV growth cycle, as it has positioned itself to expand revenue/profit pools. While valuations at 17.3x FY25E P/E (price-earnings ratio) and 9.3x EV/EBITDA (earnings before income, tax, depreciation and amortization) are reflecting the mid-cycle recovery, they do not fully reflect Ashok Leyland’s focus on the diversification of new revenue streams and increasing profit pools," Motilal Oswal said.

Analysts at ICICI Securities has maintained "ADD" rating with a revised the target price to ₹176.  Analysts at BNP Paribas have maintained a ‘BUY’ rating with an unchanged target price of ₹181.

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