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MOSL: ASHOK LEYLAND (Buy)-Multiple drivers to ensure a smooth ride-Management reiterates focus on LCVs, exports, defense, digital initiatives

Ashok Leyland: Multiple drivers to ensure a smooth ride; Management reiterates focus on LCVs, exports, defence, digital initiatives

(AL IN, Mkt Cap USD6.7b, CMP INR151, TP INR179, 19% Upside, Buy)

 

We attended Ashok Leyland’s (AL) Annual Global Conference 2018. Themed ‘Conquer new frontiers – More battles to win,’ the conference provided useful insights into the company’s operations and opportunities. Management re-iterated its focus on gaining further ground in LCVs, exports, defence and digital initiatives (after-sales and service infrastructure). Encouragingly, AL’s product launch pipeline remains strong, with five products planned to be rolled out in the M&HCV segment and two products each in the LCV and bus segments. The company also targets to launch a new variant of Dost in the LCV segment. Furthermore, AL is sanguine about the FY19 demand outlook, considering the pick-up in mining and infrastructure activities. Pre-buy demand ahead of the BS-6 emission standards implementation is another positive.

 

Key highlights of the conference

• M&HCV industry growth momentum is expected to continue until FY20. The new product launch pipeline remains robust, with around nine new products planned for roll out in FY19. AL expects the shift toward higher-tonnage vehicles to continue until FY20.
• AL is expected to continue expanding its market share this year, led by network expansion (~35% expansion in FY18 for M&HCVs and ~20% for LCVs) and new product launches.
• Robust growth in exports is attributed to healthy sales in Nepal, Bangladesh, the Middle East and ASEAN markets. The company targets to reach an exports market share of 50% in 3-5 years (v/s <35% currently of exports from India).
• The company’s focus on quality improvement, sales and customer satisfaction is resulting in industry leading performance across parameters.