Motilal Oswal Reiterates Buy on Ashok Leyland, Targets Rs 188

Motilal Oswal Maintains BUY Rating for Ashok Leyland

Ashok Leyland, a leading commercial vehicle manufacturer, reported a Profit After Tax (PAT) of INR14 billion in the fourth quarter of fiscal year 2026 (4QFY26). This figure aligns with the expectations set by Motilal Oswal's research report.

The company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin fell by 40 basis points (bp) year-over-year (YoY) to 14.6%. This decline is attributed to the high commodity costs, which, however, still meets the expectations outlined by the research report. Motilal Oswal's analysts believe that the ongoing geopolitical uncertainty will likely impact commercial vehicle (CV) demand and margins. Nevertheless, this impact is anticipated to be temporary, with both demand and margins expected to normalize from the second half of the fiscal year.

Key Highlights of Ashok Leyland's Performance

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Motilal Oswal's research report now factors in Ashok Leyland's revenue, EBITDA, and PAT to post a compound annual growth rate (CAGR) of 10%, 12%, and 15%, respectively, over the period of fiscal years 2026 to 2028 (FY26-28E). The company's focus on margin expansion and prudent capital expenditure control is expected to improve its returns in the long run.

Outlook and Recommendation

Ashok Leyland is expected to maintain a net cash position, enabling it to invest in growth opportunities in the coming years. Motilal Oswal reiterates its BUY rating for the company, with a target price of INR188. This valuation is based on an enterprise value-to-EBITDA (EV/EBITDA) multiple of 13 times for fiscal year 2028 (FY28E) and an additional INR10 per share for the non-banking financial company (NBFC).

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