Business
Ashok Leyland Shares Decline Following CLSA Downgrade Due to Market Concerns
Shares of Ashok Leyland Ltd. experienced a significant drop of up to 3% during early trading sessions on Wednesday. This decline followed a downgrade from the brokerage firm CLSA, which adjusted its rating on the stock from “outperform” to “underperform.”
Alongside the downgrade, CLSA reduced its price target for Ashok Leyland by 27%, bringing it down to ₹188 from the previous target of ₹258. This revised target suggests a potential downside of 15% from the stock’s closing price on Tuesday.
In CLSA’s investor note, the firm highlighted a nearly 10% decline in domestic truck sales during the first half of the financial year 2025. “This marks the beginning of a down cycle within the commercial vehicles sector,” stated the brokerage. It further predicts this downturn will persist until the financial year 2026.
The decline in the domestic truck sales is attributed to the road freight market, which has shifted into an oversupply situation following a period of robust supply growth from the financial years 2022 to 2024. CLSA forecasts a 5% year-on-year decline in the volumes of Medium and Heavy Commercial Vehicles (M&HCV) for the financial years 2025 and 2026.
Additional headwinds cited by CLSA include reduced scale and increased risk of discounts, which are expected to impact Ashok Leyland’s margins. The brokerage anticipates a reduction in margins by 200 basis points, down to 10.4% in the financial year 2026, from 12.4% recorded two years prior.
As a consequence of these projected challenges, CLSA has decreased its Earnings Per Share (EPS) forecasts for Ashok Leyland for the financial years 2025, 2026, and 2027 by 12.6%, 34.9%, and 23.5% respectively.
Despite the downgrade, out of 44 analysts providing coverage on Ashok Leyland, 31 maintain a “buy” rating, while four have issued a “hold” recommendation, and nine suggest “sell.”
At present, Ashok Leyland shares are trading at ₹215.84, reflecting a 3% decrease. Over the past month, the company’s stock has seen an 11.5% decline, effectively reducing its gains for the year 2024 to 16%.
