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MOSL: Morning India (11/April/18): 1. Ashok Leyland – Positive CV demand outlook for FY19 and FY20; 2. NHPC – Lower under-recoveries to boost earnings; 3. 4QFY18 Preview: Consumer

MOrning India (11/April/18):

Today’s top research idea
Ashok Leyland: Positive CV demand outlook for FY19 and FY20; Pricing power returning, with discounts reducing from January 2018
** We met senior management of Ashok Leyland (AL). AL expects FY19 M&HCV industry volumes to grow 10%, driven by infra, construction & mining, and rigorous implementation of rated load capacity in other markets.

** Tippers segment is expected to see good growth in FY19, along with continued momentum in MAV and tractor trailers.

** For FY20, AL expects significant pre-buying ahead of BS6 implementation from April 2020, as trucks could get expensive by up to INR250k. It is hopeful of scrap page policy being implemented from April 2020.

** Based on mandatory scrapping of trucks over 20 years old, it sees additional demand of 400k-450k units. This would help support demand in FY21, despite pre-buy impact.

** We value AL at ~INR179 (10x March 2020E EV/EBITDA + INR13.1/share for stake in HLF post 20% HoldCo discount). Maintain Buy.

Piping hot news
GST e-way bill compulsory for local goods shipment in 5 states from 15 April
** Generating e-way bills will be compulsory for transporting goods locally in five more states starting 15 April as the nation gradually extends the scope of electronic permits mandated for goods shipments across state borders from the beginning of the month. A statement from the finance ministry said that Andhra Pradesh, Gujarat, Kerala, Telangana and Uttar Pradesh will make e-way bills compulsory for movement of goods within their boundaries. Karnataka had implemented it for local movement of goods when the e-way bill requirement was implemented from 1 April nationwide for inter-state shipments.