Ashok Leyland's (ALL) Q1FY22 results were below our expectations primarily on account of sharper decline in EBITDA margins than our estimates. Management expects volume recovery to take place from H2FY22 onwards on account of a) demand in MHCV truck segment (Tippers) due to Govt. strong Infra push b) replacement demand emanating from scrappage policy and c) last mile connectivity need of eCommerce. To factor in changing business environment, we have revised our volume and PAT estimates downward by 7.2%/0.6% and 26.7%/+4.3% for FY22 and FY23 respectively.

Commenting on the result review, IDBI Capital Equity Research said, "Currently Indian MHCV market is at multi-year lower (50% below FY19 peak) and likely to bounce back in the medium term. Even we assume ALL's business volumes to rebound in FY24 to its FY19 peak (blue sky scenario), still stock is trading at PER of 18.1x FY24E earnings. Hence, we believe the stock has been priced to perfection and does not leave any scope for disappointment. We retain our Hold rating on the stock with price target of Rs130 (18xFY24E earnings + Rs19 Hinduja Leyland Finance value)."

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