- Date : 23/06/2023
- Read: 3 mins
Ashok Leyland has seen substantial growth in stock price. We look at the factors contributing to the growth, along with experts’ opinions on the stock.
- Ashok Leyland is a major player in the commercial vehicle segment
- Recently, its share price saw a 7% growth within a month
- The commercial vehicle sector is seeing a demand upswing
- Ashok Leyland has maintained a market share of more than 30%
- Analysts are expecting the stock to grow in near-term
Chennai-based Indian multinational company Ashok Leyland is an integrated auto manufacturer whose product suites include commercial vehicles, defence vehicles and power solutions. This Hinduja Group company has seen a consistent rise in its share price in the last month, peaking at 7%. Even now it is trading at 6.1% more than its share price from a month ago.
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Contributing Factors
Here are some of the factors that are contributing to the growth in the share price of Ashok Leyland.
Upbeat sector – The commercial vehicle sector is witnessing growth due to the increase in commercial fleets and replacements. The overall tonnage carried by these vehicles is increasing. This is due to the government’s impetus on infrastructure expenditures, with the government increasing its allocation on capital expenditure and transportation. Industry-specific demands from agriculture, mining, construction, infrastructure, etc. are also aiding the demand for commercial vehicles.
Improving market presence – Ashok Leyland’s management continues to be committed to increasing the company’s market share and presence through an increase in the dealership network.
New product launches – It has been launching new products in segments like electric vehicles, multi-axle, the tipper/haulage segment, etc. It also manufactured India’s first double-decker electric bus. This has contributed to the company’s 30%+ market share which has been consistent in the last four quarters.
Pricing benefits – Buoyed by a wide product range, the company has managed to take and retain price hikes. Stability in commodity prices and an increase in volume are expected to support the company in achieving healthy margins.
New partnerships – The company has partnered with Aidrivers for the production of electric terminal trucks, specifically for the port industry. Aidrivers is an autonomous mobility solutions provider, and the partnership will work towards the company’s zero-emission goals.
Expert’s Take
Most market experts are optimistic about the stock. BNP Paribas has kept a price target of Rs 181 while identifying their improving margins as the key influence. Jefferies has additionally noted the strong demand and increasing market share while setting a near-term target price of Rs 195. Prabhudas Liladher declared a more optimistic target of Rs 215. It was trading at around Rs 160 at the time of writing.
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Final Words
Despite a fall in profit in Q4 results, Ashok Leyland confirmed robust sales, operating margin and profit growth in the quarterly result announcements. The overall upswing in the commercial vehicle sector is expected to help Ashok Leyland optimise its advantages in pricing, market share and product innovation.
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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
