Ashok Leyland Ltd shares dropped over 4% in intraday trade on Thursday after the commercial vehicle manufacturer reported a whopping 92.7% decline in standalone profit for the December quarter (Q3) at Rs 27.7 crore compared with Rs 380.8 crore in the year-ago quarter.
The earning of the flagship firm of the Hinduja Group were mainly hit by lower sales. Revenue during the December quarter declined 36.5% year-on-year to Rs 4,015.60 crore as volumes dropped 28.7%. “The M&HCV (medium and heavy commercial vehicles) sector continued to witness a decline in volume of 39%. Ashok Leyland also witnessed a volume drop this quarter,” said MD and CEO Vipin Sondhi.
Ashok Leyland shares touched an intra-day low of Rs 77.90 apiece on Thursday but later pared losses to trade at Rs 80.30, down 1.3%, as brokerages remained positive on the outlook of the company.
Global brokerage firm Morgan Stanley maintained its ‘Overweight’ rating on the stock with a target price of Rs 111 per share. Despite a tough demand environment, the company maintained good cost discipline, it said, adding that Ashok Leylannd’s reported earnings were in-line with estimates as the demand environment remained subdued.
Nomura also reaffirmed its ‘Buy’ rating on the stock with a target of Rs 97 after the earnings announcement. The brokerage firm said it maintains its view of a 15%/25% industry recovery in FY21/22 and expects margin to revive as the volume growth trajectory picks up in FY21. The valuations are not expensive at current levels, Nomura added.
Credit Suisse, meanwhile, was ‘Neutral’ on the Ashok Leyland stock with a target price of Rs 75 per share. The margin miss has driven a weak quarter, said the brokerage firm. The staff costs dropped sharply, and it should normalise in subsequent quarters, it added.
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