Ashok Leyland – Vehicle to Prosperity!

Ashok Leyland, India’s second largest commercial vehicle manufacturer continues to show growth in this quarter as well. Sales of its heavy and medium vehicles for FY16 rose up to 46 per cent as compared to last quarter. The leader in this segment, Tata Motors reported growth of 26 per cent only.

AL has obtained a market share of 18.5% in its segment. The company has been aggressively expanding its network by opening service outlets at various locations especially in South India. This has helped the company gain market share in trucks segment. Also, a shift towards higher tonnage vehicles and new product introductions helped market share grow further.

Company also designs and develops military vehicles under newly floated company, ‘Ashok Leyland Defense Systems’. AL is the largest supplier of logistics vehicles to the Indian Army. It has supplied over 60,000 of its Stallion vehicles to army. Recently, it received new orders worth Rs. 800 crores for supply of 450 field artillery tractors and 825 ambulances; which would further boost its revenues. The company is likely to get more orders from Govt. of India’s initiative – ‘Make in India!’

In providing service to its existing customers, company has opened over 400 full-service outlets across India; which itself is a sign of growth. It has also started 24×7 helpline called ‘tatkAL’ through which service staff could reach a damaged vehicle within 4 hours and restore it in 48 hours – across

Our opinion on this stock: – Ashok Leyland has received several orders for which it will take a year or two to fulfill. Especially the order from military is going to execute in two years. Sales for city buses is also geared up as orders for about 2500 buses from JnNURM phase II are expected to be fulfilled next year. The company’s share looks fundamentally strong. Currently, the stock is trading around Rs. 98 to Rs. 102/-. The stock could be bought for a period of nearly 1 year or more to earn good returns.

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