Ashok Leyland - The darkest hour before the dawn... - ICICIdirect

Ashok Leyland (ALL) has reported its Q3FY13 numbers, which were lower than our estimates. Operating margin at 4.3% was lower 580 bps QoQ. This was a quarter to forget for ALL as both topline and margins took a beating. The PAT was boosted by sale of non-current investment Slowdown in industrial activity has led to a decline in overall CV volumes, especially the M&HCV segment, which has declined ~28% YoY.

The Dostled LCV segment has managed to stem the fall with a quarterly run-rate of ~8,000 units. Going forward, we expect the industrial activity to pick up as macro headwinds recede. The management commentary regarding cost and working capital management is also positive.

Thus, despite the poor performance in the quarter, at 0.6x PEG FY12-14E, with improving RoEs, the stock looks attractive and we maintain BUY with a target price of Rs.30.

Source : Equity Bulls

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