Ashok Leyland - Revving up! - Motilal Oswal

CV cycle to recover in FY14; AL offers best play

- CV cycle to bottom-out in FY13 and witness sharp recovery in FY14, driven by expected monetary easing and resultant pick-up in the industrial activity.

- Ashok Leyland's volumes would be supported by demand pick-up in South India, new launches, and Dost ramp-up. Higher utilization at Pantnagar coupled with better operating leverage would support margins; Dost would contribute meaningfully to overall profits.

- Estimate EPS growth of ~31% CAGR in FY14-15 driven by volume growth of 16%. RoE to bottom-out in FY13 and improve 270bp in FY14. Also, it trades at very attractive yield of over 4%. Initiate coverage with a Buy rating and a target price of INR32.

Source : Equity Bulls

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