Ashok Leyland - Lackluster performance - Emkay

Reco: ACCUMULATE
CMP: Rs 23
Target Price: Rs 30

- AL's Q1 operational performance was broadly in-line with expectations but net profits disappointed due to higher interest cost on working capital loans

- In the near-term the stock is likely to lack positive catalysts given lackluster M&HCV industry outlook and no signs in improvement of freight volume/rates data

- We have marginally reduced our M&HCV segment growth estimates to 3%/12% in FY13/FY14 given that an H2 recovery looks less likely

- We believe that the stock price more than factors the poor outlook; at 5.8x/5.2x FY13/FY14E EV/EBITDA, the stock trades at a discount to long-term average

- Maintain ACCUMULATE with a TP of Rs 30 based on 6.5x FY14E EV/EBITDA.

Source : Equity Bulls

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