1:10 Split, 1:1 Bonus; Below Rs 200, Auto Stock To Pay Rs 4.95/Share Dividend Soon; Buy For Rs 221 TP

Ashok Leyland, a leading commercial vehicle manufacturer, has come up with dividend rewards for its investors. The company will pay its first dividend of Rs 4.95 per share for FY24 by next month. For this, it has a fixed record date to determine eligible shareholders. Ashok Leyland is a hot pick as its medium-term growth and margin drivers are intact. The highest target price is Rs 221, which implies around 30% potential upside in Ashok Leyland.

Ashok Leyland Share Price:

Trading below Rs 200, Ashok Leyland is closing its gap towards a 52-week high. At the time of writing, Ashok Leyland's share price traded at Rs 169.85 apiece, up by 1.98% on BSE with a market cap of Rs 49,873.52 crore.

The stock was near its intraday high of Rs 170.20 apiece. The stock's 52-week high and low is at Rs 191.45 and Rs 133.10 apiece respectively.

Ashok Leyland's Upcoming Dividend:

As per the regulatory filing, Ashok Leyland has declared an Interim Dividend of Rs. 4.95/- per equity share of Re. 1/- each, for the financial year ending 2023-24.

The record date for determining the Members eligible to receive Interim Dividends is Wednesday, April 3, 2024. While Ashok Leyland said that the said interim dividend, would be paid, on or before April 23, 2024.

This upcoming dividend payout is nearly double the amount it paid in the previous fiscal. In FY23, Ashok Leyland paid dividends up to 260% amounting to Rs 2.6 per share.

On the current market price, Ashok Leyland's dividend yield is around 1.54%.

Ashok Leyland's Other Corporate Affairs:

Bonus Issue: Ashok Leyland has paid bonus shares only once. The company delivered 1:1 bonuses to its investors in August 2011.

Stock Split: Before bonus shares, Ashok Leyland carried one stock split in the ratio of 1:10. The face value of Rs 10 was trimmed to Rs 1, effective from June 28, 2004.

Ashok Leyland Earnings:

In Q3FY24, the company recorded revenues of Rs 9,273 crore, versus Rs 9,030 crore in Q3 FY23, a growth of 2.7%. While it reported EBITDA of Rs. 1,114 crore (12.0%) in Q3 FY24 vis-à-vis Rs. 797 crore (8.8%) in Q3 FY23, registering double-digit percentage EBITDA in all three quarters of the fiscal year.

Further, Ashok Leyland reported a net profit of Rs. 580 crores, an increase of 60% over Q3 FY23. Notably, Ashok Leyland achieved a historic high CV volume of 1,38,416 units in the first nine months of the fiscal year.

Ashok Leyland Share Target Price:

In its latest research report, KR Choksey said, "AL, as a key player in the domestic CV industry, will continue to benefit from the Government's focus on infrastructure, replacement demand, improving freight demand and a move to higher tonnage vehicles. The buses segment will see demand coming from the replacement of existing fleets, public transport impetus, and increasing demand for school and staff transportation. While volumes will be impacted in the next couple of quarters due to a high base effect and the general elections sometime in Q1FY25E, the medium-term prospects for the industry remain good."

Further, KR Choksey's note added that "The margin improvement story remains strong as AL is following strict pricing discipline and is focusing on improving profitability through cost rationalization. Management continues to target higher market share in the medium term, through distribution expansion and differentiated products. However, the market share gains will not be at the cost of margins. The non-vehicle businesses of defence, aftermarkets and power solutions are each seeing strong traction and are set to have a record performance in FY24E."

The brokerage revised the company's adjusted EPS estimates by -8.3%/ -13.7% for FY24E/ FY25E as KR Choksey factors in the near-term volume pressure from a high base and the upcoming union elections, while it continues to expect strong margin delivery.

On the valuation, KR Choksey's note said, "We have introduced our FY26E estimates and expect a Revenue/ EBITDA/ Adj. PAT CAGR of 8.2%/ 22.4%/ 37.3% respectively over FY23 to FY26E. The stock is currently trading at 21.1x/ 17.3x/ 15.4x our FY24E/ FY25E/ FY26E Adj. EPS estimates, respectively. We have assigned a P/E multiple of 19.3x on FY26E EPS of INR 11.4 to arrive at a target price of Rs 221/share (unchanged). The target price implies a potential upside of 26.3% from the CMP. Accordingly, we maintain our "BUY" rating on the shares of Ashok Leyland Ltd."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.