Ashok Leyland shares near 52-week high, surge 61% in 2 months

Analysts expect a gradual revival by the end of FY21, led by a low base, replacement demand and pick-up in economic activity

Shares of Ashok Leyland climbed 6 per cent to Rs 83.10 on the BSE on Friday, on expectation of demand revival. The commercial vehicles maker's stock is trading close to its 52-week high level of Rs 87.50, touched on January 24, 2020. In the past two months, the stock has rallied 61 per cent, as compared to 5.3 per cent rise in the S&P BSE Sensex.

On Thursday, September 17, Ashok Leyland announced that it has received a large order from a logistics start-up company, Procure Box. The company has placed an order of 1400 intermediate commercial vehicles [ICVs] for its fuel distribution business across 750 districts, in the country. The order encompasses the most successful Ashok Leyland product – the Ecomet and will be executed in the next 5-6 months.

With the addition of 1400 new Ashok Leyland ICVs, the logistics start-up and its associates will become the top fuel bowsing and Gas cylinder logistics company in the industry, the company said in a press release.

Ashok Leyland is the flagship company of the Hinduja Group and is India’s leading commercial vehicle manufacturer.

Analysts at Emkay Global Financial Services expect a gradual revival by the end of FY21, led by a low base, replacement demand and pick-up in economic activity. In the last three up-cycles, the average period of positive growth has been four years, and minimum growth from trough to peak is 90 per cent.

“The company is likely to gain share in domestic MHCVs from 32 per cent in FY20 to 33 per cent in FY22E, led by new products based on a modular platform. Similarly, the market share should increase in LCVs from 9 per cent in FY20 to 15 per cent in FY22E, led by new product Phoenix LCV in 2.5-4.9T segments,” the brokerage firm said in the June quarter result update. It has ‘overweight’ rating on the stock with target price of Rs 89 per share.