Shares of Ashok Leyland, a prominent player in the automotive sector and part of the Hinduja Group, experienced a notable rise of 2.25% during Tuesday’s trading session, closing at ₹208 each. This surge comes amidst a challenging start to FY26 for key market indices. The boost in stock price can be attributed to the company’s impressive sales figures for March, which surpassed analysts’ expectations.
Strong March Sales Performance
In a recent update, Ashok Leyland disclosed a 6% year-on-year increase in sales for March, with a total of 22,510 vehicles (inclusive of medium and heavy commercial vehicles as well as light commercial vehicles) sold domestically. This marks a rise from 21,187 vehicles sold in the same month last year.
- Total domestic sales: 22,510 vehicles
- March 2023 sales: 21,187 vehicles
- Total sales including exports: 24,060 units, up from 22,736 in March 2024
- FY25 total vehicle sales: 195,097, a slight increase from 194,553 units in FY24
Strategic Changes and Restructuring
The company recently engaged with analysts regarding strategic adjustments, including the potential cessation of manufacturing activities at its UK subsidiary, Switch Mobility, due to economic challenges in the local bus manufacturing landscape. Ashok Leyland is rethinking its operational model, with plans to focus more heavily on its Indian market while scaling back in the UK.
According to insights from ICICI Securities, Switch Mobility India is on track to achieve EBITDA break-even by FY25, with a projected PAT break-even within the next four to six quarters. While reducing operations at Switch UK could provide long-term benefits, the increase in promoter pledge remains a concern that could impact stock performance in the short term.
Positive Outlook Amidst Challenges
Motilal Oswal highlighted that following the restructuring, Switch UK is expected to no longer dilute earnings at a consolidated level, which is promising for Ashok Leyland. Moreover, neither of the Switch entities is anticipated to require immediate funding support. However, the rise in promoter pledges could pose a challenge for the stock.
ICICI Securities maintains an ‘Add’ rating on Ashok Leyland with a target price set at ₹250, while Motilal Oswal continues to advocate a ‘Buy’ rating, projecting a target price of ₹255.
Financial Highlights
In the third quarter of the last fiscal year, Ashok Leyland reported a substantial 32% increase in standalone net profit, reaching ₹762 crore, compared to ₹575 crore in Q3FY24. Additionally, standalone revenue rose 2.7% year-on-year, totaling ₹9,478 crore, up from ₹9,273 crore in the previous year.
As Ashok Leyland navigates these changes and focuses on strengthening its core operations in India, investors will be closely monitoring how these strategic decisions affect future performance.
