Ashok Leyland Share Price Target at Rs 285: Deven Choksey
Ashok Leyland’s Q4FY25 earnings report reinforces the commercial vehicle major’s growth narrative. Deven Choksey’s institutional research desk has reiterated a BUY recommendation on the stock, assigning a target price of Rs 285, implying a 19.2% upside from the current market price of Rs 239. Backed by volume recovery, margin resilience, and robust demand from MHCV and bus segments, the company posted a strong beat on profit expectations. Strategic cost management and a better product mix aided operating leverage, while the medium-term outlook remains supported by sectoral tailwinds and improved operating metrics.
Strong Volume Uptick and Revenue Growth
Volumes rose to 59,176 units in Q4FY25, reflecting a 4.9% YoY growth and 27.5% QoQ improvement. This uptick signals the continuation of replacement-led demand and an expanding market share, particularly in the medium and heavy commercial vehicle (MHCV) segment.
Revenue for the quarter stood at Rs 11,910 crore, up 5.7% YoY and 25.6% QoQ, in line with expectations. The growth was supported by improved pricing dynamics and higher realizations due to a favorable product mix, with sustained traction in buses and defense segments.
Robust EBITDA Performance Beats Estimates
EBITDA came in at Rs 1,791 crore, growing 12.5% YoY and a striking 47.8% QoQ. The metric exceeded Deven Choksey’s estimates by 14.5%, driven by efficient cost control and scale benefits.
The company's focus on operational efficiencies continues to yield results, as reflected in the sequential margin expansion and improved profitability per vehicle.
Net Profit Surges, Driven by Operational Gains
Adjusted net profit stood at Rs 1,259 crore, up 29.8% YoY and 65.3% QoQ. This outperformance versus the estimated figure (by 20.4%) is attributed to higher-than-expected other income and improved operational leverage.
The strong bottom-line growth highlights the company's ability to capitalize on market recovery and control discretionary expenditure.
Forward Estimates Revised Upward
Deven Choksey has upgraded FY26E and FY27E EPS estimates by 1.3% and 2.2%, respectively, factoring in the sector’s recovery trajectory, sustained demand for MHCVs and buses, and an improving industry backdrop.
The firm now expects revenue/EBITDA/adjusted PAT to grow at 8.9%/15.5%/17.4% CAGR over FY25–FY27E. This reflects confidence in Ashok Leyland's pricing power, distribution strength, and domestic market positioning.
Valuation and Target Multiple
At current levels, Ashok Leyland is trading at 18.5x/16.0x FY26E/FY27E EPS, which appears reasonable given the earnings growth trajectory and margin visibility.
Deven Choksey values the stock at 19.0x FY27E EPS, leading to a target price of Rs 285.** The valuation reflects a balanced view of cyclical risks and medium-term recovery potential in core business segments.
Operational Highlights: Growth in Strategic Verticals
The company’s ongoing investments in new product development and exports remain pivotal. Growth in the defense vehicle and electric bus categories is progressing steadily, supporting a diversified revenue profile.
Also, the management's commentary pointed to a more favorable industry landscape in FY26, supported by government infrastructure spending, fleet replacements, and rural freight demand.
Key Financial Indicators
Below is a summary of core Q4FY25 financials:
| Metric | Q4FY25 | YoY Change | QoQ Change |
|---|---|---|---|
| Volume (Units) | 59,176 | +4.9% | +27.5% |
| Revenue (Rs crore) | 11,910 | +5.7% | +25.6% |
| EBITDA (Rs crore) | 1,791 | +12.5% | +47.8% |
| Adjusted PAT (Rs crore) | 1,259 | +29.8% | +65.3% |
Investment Thesis: Why BUY is Justified
The BUY call rests on five pillars:
Stable demand from replacement cycle and infrastructure projects
Margin improvement through better mix and cost optimization
Resilient earnings trajectory backed by strong order book
Attractive valuation at current levels with a visible rerating potential
Expansion in export and electric vehicle segments providing optionality
Risks to Monitor
Volatility in raw material costs (especially steel and aluminum) could pressure margins
Demand slowdown or policy uncertainties in commercial vehicle sector
Execution risk on electrification strategy and international market expansion
Bottomline for Long Term Investors
Ashok Leyland’s Q4FY25 performance marks a strong end to the fiscal year and sets a solid tone for FY26. Deven Choksey remains bullish, with an upgraded earnings outlook and reaffirmed target of Rs 285. Investors looking for exposure to India’s economic recovery through the lens of commercial mobility may find Ashok Leyland a compelling bet. The stock trades at a discount to historical averages, with earnings recovery and product portfolio diversification acting as long-term levers.
