MUMBAI: CLSA has maintained sell rating on Ashok Leyland with a target price of Rs 100 following the company's second quarter results, citing concern on truck demand, new axle loading norms and financing issues at NBFCs,
"We remain concerned on truck demand given that the industry is already in the fifth year of upcycle, while the recent increase in axle loading norms and financing issues at NBFCs have further clouded industry outlook," said CLSA.
"Competitive intensity is also likely to rise if demand slows down, which would have an impact on margins," said CLSA.
Shares of Ashok Leyland fell 9 per cent on Wednesday after CEO and MD Vinod Dasari announced his decision to step down, citing personal reasons. Ashok Leyland reported 37 per cent YoY increase in its standalone net profit at Rs 460 crore for second quarter.
CLSA said Ashok Leyland's stock has come off 28 per cent from May 2018 peak, but its valuation of 17 times FY20 estimates for a 7 per cent EPS CAGR in FY19-FY21 is not cheap. especially given CV cycle concerns.
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