Updated: Nov 17, 2019
Brief about the Company:
The Company is engaged in commercial vehicles and related components. Through its subsidiaries, it is engaged in manufacturing and trading in Medium and Heavy Commercial Vehicle, Light Commercial Vehicles, Passenger vehicles, automotive aggregates, vehicle financing and engineering design services. Ashok Leyland currently has manufacturing operations across nine countries, including the UAE, Bangladesh, Sri Lanka, Nigeria, the UK and Kenya.
10 Solid Reasons:
1. Capex: The company, which has earmarked a Capex of Rs 1,500 crore for various projects during the current fiscal, is also working on a separate platform for light commercial vehicles (LCVs). Its ROE and Net profit margin have shown tremendous recovery.
2. 20–25 new models: Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20 million) to launch 20–25 new models across the various commercial vehicle. Compounded Sales Growth in last 3 Years is a whopping 23.55%.
3. Sales (number of Vehicles): Ashok Leyland sold 1,94,254 vehicles (M&HCV and LCV) in FY18–19 and expecting to grow this number exponentially in FY19–20.
April numbers are already up 4% YoY.
4. Investments: The industry has attracted Foreign Direct Investment (FDI) worth US$ 20.85 billion during the period April 2000 to December 2018, according to data released by the Department of Industrial Policy and Promotion (DIPP).
5. Technical Analysis: Technical, This may be a good time to get in.
6. Performance of the Stock: Ashok Leyland performed better in every situation as compared to its competitors.
7. Cash Rich: From 728 Cr in March 2013 to 5,418 Cr in March 2018, Ashok Leyland has shown massive growth in cash from operating activities. The company has also been maintaining a healthy dividend payout of 50.40%.
8. Industry outlook:
Indian automotive industry is expected to reach Rs 16.16–18.18 trillion (US$ 251.4–282.8 billion) by 2026 as The government aims to develop India as a global manufacturing center and an R&D hub.
9. Ratings: ICRA has revised upwards its long-term assessment for Ashok Leyland from AA (positive) to AA+(Stable), while the short-term rating was reaffirmed at A1-Plus.
10. Other Financial health (TTM): For long term investors.
. ROCE: 28.40 %
. ROE: 23.22 %
. Free cash flow 5years: 10,710 Cr.
. Debt to equity: 0.14
. Interest Coverage: 8.153
. Contingent liabilities: 640.46 Cr.
Ashok Leyland is the second-largest commercial vehicle manufacturer in India, fourth largest manufacturer of buses in the world and 10th largest manufacturer of trucks globally. It can easily be held for the longer term for massive capital appreciation.
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