Morgan Stanley has revised its target price for Ashok Leyland Ltd., a leading commercial vehicle manufacturer, from Rs 284 to Rs 288. This upgrade is primarily driven by the company’s stronger net cash position, which has improved its financial stability and flexibility. However, the brokerage firm has also made some revisions to its volume estimates for Ashok Leyland.
On the domestic front, Morgan Stanley has cut its Medium and Heavy Commercial Vehicles (M&HCV) volume estimates by 2% for fiscal 2026, citing slower demand in the market. This reduction in demand is expected to have a marginal impact on the company’s overall sales. Despite this, the firm’s volume estimates remain largely unchanged, indicating that the impact of slower demand will be offset by other factors.
On the export front, Morgan Stanley has increased its volume estimates for Ashok Leyland, driven by the company’s strong performance in international markets. Ashok Leyland has been doing well in exports, and the brokerage firm expects this trend to continue, contributing to the company’s overall growth.
In terms of pricing, Morgan Stanley has lowered its average selling price estimates for fiscal 2026 and 2027, due to lower realizations in fiscal 2025. The implementation of AC cabin regulations and higher steel costs are also expected to have a negative impact on the company’s Ebitda margin estimates, with cuts of 20 basis points and 10 basis points for fiscal 2026 and 2027, respectively. However, lower-than-expected depreciation and higher other income are expected to keep the company’s EPS estimates largely unchanged.
Recently, Ashok Leyland won a significant order from the Tamil Nadu government to supply hundreds of diesel buses by the end of the year. This order is expected to contribute to the company’s sales and revenue growth in the coming months. Overall, Morgan Stanley’s revised target price and estimates for Ashok Leyland reflect a mixed outlook for the company, with strengths in exports and a strong net cash position, but challenges in domestic demand and pricing.