Company - Ashok Leyland Limited (19-11-2010)CMP - 74
Target - 100
Time Frame - 6-8 month
Up Side Potential - 30%
Strong Capex plans: Ashok Leyland is planning to invest around INR 2,000 crore over the next two years, both at its existing plants and in joint ventures. Over the next two years the company will invest INR 1,200 crore for modernizing the company's plants and creating additional infrastructure.
New Launches: Ashok Leyland has launched 10 models of tippers and tractor trailers on the new U-truck platform. The vehicles, under the 16-49 tonne category, would be available for pan-India sale in a phased manner over the next few weeks. In the next 12 months, the
company plans to launch 15 more models in the domestic market.
Set its eyes on global stage: Ashok Leyland already exports to South Asia and the Middle East, but is also keen to break into commercial vehicle markets in Latin America, Africa and other parts of Asia.Utilizing its frugal engineering capabilities, technology advantages and cost-effective production, ALL senses huge opportunities will actively push this strategy forward.
Strong Financial performance: Ashok Leyland has reported a profit of Rs.167.06 crore for the second quarter ended September 30, 2010,against Rs.88.61 crore in the same quarter last year. Revenues have risen to Rs.2713.95 crore from Rs.1577.28 crore. The increase in profit and revenue comes on the back of a record sale of 45,989 vehicles (21,990 vehicles) in the first-half of the current fiscal,which helped in pushing the company's market share in medium and heavy commercial vehicles to over 27 per cent. International operations also registered a growth of 39 per cent at 2,350 vehicles
At the CMP of Rs 74, the stock is trading at a consolidated PE of 16.30x and 13.20x to its FY11E and FY12E EPS of Rs 4.65 and Rs 5.74, respectively. Since the stock offers good opportunity, we initiate a 'BUY' signal on the stock with a target price of INR 100.00 in medium to long term investment horizon expecting an appreciation of about 30%
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Disclaimer:-This report has been prepared solely for information purposes. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.
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