Ashok Leyland volume upcycle and HLF listing support earnings recovery

Investment View and Valuation

Geojit Investments Limited's September 29, 2026 company update on Ashok Leyland retains a BUY rating and values the stock at Rs 179 per share.

The positive view is based on a commercial vehicle upcycle driven by GST 2.0, which Geojit believes has improved the replacement economics for ageing BS3 and BS4 trucks. Premiumisation, price actions, cost savings and an improved product mix are also expected to support margin recovery in H2FY27.

Ashok Leyland is India's second-largest commercial vehicle manufacturer and held around 31 per cent domestic MHCV market share in FY26.

Q1FY27 Financial and Operating Performance

Ashok Leyland reported record Q1FY27 standalone revenue of Rs 9,634 crore, up 10.4 per cent year on year, alongside record commercial vehicle volumes of 48,763 units. Reported PAT increased 2.6 per cent year on year to Rs 609 crore.

EBITDA was flat year on year at Rs 970 crore, while EBITDA margin contracted by 105 basis points to 10.1 per cent as commodity inflation raised material costs. The quarter benefited from cheaper opening inventory, which accounted for roughly one-fourth of material needs. Geojit expects commodity-cost pressure in Q2FY27 to be greater than in Q1FY27, with relief largely from Q4FY27.

Vehicle Volumes and Business Trends

Domestic MHCV truck volume increased 15 per cent year on year to 22,998 units, while LCV volume grew 21 per cent to a Q1 record of 18,874 units. Bus volume declined because Ashok Leyland avoided unprofitable orders.

Non-CV businesses remained supportive. Aftermarket revenue increased 12.7 per cent, power solutions revenue rose 51 per cent and defence revenue grew 64 per cent year on year. CV exports fell 18 per cent to 2,461 units due to war-led disruption, representing a pressure point for the business.

Pricing, Products and Capacity Economics

During FY27, cumulative price increases were around 2.25 per cent in MHCV and above 3.5 per cent in LCV, including a July 1 increase. The company is evaluating an additional price increase and discount optimisation.

• Ashok Leyland introduced an industry-first air-suspension offering for multi-axle trucks, providing a 4-tonne additional payload against the usual 2 tonnes.
• HIPPO tractors and TAURUS tippers are seeing strong traction.
• Lower fixed costs and growth in non-MHCV businesses have reduced the monthly MHCV volume needed to cover fixed costs to 1,000 to 1,500 trucks from 6,000 to 7,000 trucks.

Network, Capex and Electric Mobility

Ashok Leyland added 33 touchpoints in Q1FY27, taking its network to 2,137, with a focus on North and East India. Q1FY27 capex was Rs 153 crore, focused on alternate powertrains and EVs. Switch Mobility had an order book of 2,100 electric buses.

Hinduja Leyland Finance

Hinduja Leyland Finance reported Q1FY27 AUM growth of 20 per cent year on year to Rs 60,310 crore and PAT growth of 37 per cent to Rs 123 crore, with net NPA at 2.1 per cent.

Geojit sees potential value unlocking from Hinduja Leyland Finance's proposed listing through a merger with NDL Ventures, subject to final NCLT sanction. Ashok Leyland owns a 61 per cent stake in Hinduja Leyland Finance, and the listing is expected to provide the finance business with direct access to public capital.

Earnings Forecasts and Target Price

Geojit expects revenue to grow at about 10 per cent CAGR and earnings at about 11 per cent CAGR over FY26 to FY28E. FY27E revenue, EBITDA and adjusted PAT estimates were raised by 18.2 per cent, 11.0 per cent and 15.7 per cent respectively. However, FY27E EBITDA margin was reduced by 80 basis points to 12.2 per cent.

The target price values the standalone business at 12.5 times EV to EBITDA for Rs 164 per share and Hinduja Leyland Finance separately at Rs 15 per share. The broker also cites Ashok Leyland's net cash balance sheet as support for its valuation.