Ashok Leyland - Poor operating performance; Maintain HOLD - Emkay

Reco: HOLD
CMP: Rs 16
Target Price: Rs 17

- Q1FY14 op. performance was dented by poor operating leverage, higher discounts and adverse mix

- Mgmt expects a 10% decline for the industry in FY14; scenario of high discounting to continue in the near term

- We maintain our negative stance on the M&HCV industry and cut M&HCV growth est. for AL from +6%/15% to -5%/15%

- We lower our FY14/FY15 EPS estimates by 98%/37%; the earnings cut looks sharper owing to a low base

- We lower our TP to Rs 17 (Rs 25 earlier), valuing the stock at 7.0x FY15E EV/EBITDA. The stock is currently trading at 6.7x EV/EBITDA and 1.4x P/BV in FY15

Source : Equity Bulls

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