Wednesday, September 15, 2010

Ashok Leyland; No room for negative surprises, Maintain HOLD; Target: Rs 76

Ashok Leyland Ltd.

Reco: HOLD

CMP: Rs77

Target Price: Rs76

No room for negative surprises, Maintain HOLD

·      Maintain volumes guidance of 90,000 units for FY11. Export demand picking up. Margins guidance continues to be subdued at 10% to 11% for FY11

·      October 2010 can record strong wholesale billings as company can sell old emission vehicles if there is an excise clearance before 1st October

·      Upgrade FY11 EPS by 1.2% due to change in volume mix and FY12 EPS by 8.6% due to higher production assumption at Uttaranchal and hence lower tax rate

·      Maintain HOLD rating. M&HCV demand momentum to peak out, expect concerns with volume growth for FY12 from 3Q/4Q FY11. Valuations not reflecting the same 

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