Ashok Leyland shares declined 3.6% on Monday, ending at ₹149.8 and emerging as one of the worst performers on the Nifty Auto index. According to CNBC TV18, the stock has fallen 7% in the last one month and is down 20% so far for the year. The latest decline came after the company reported disappointing May sales figures that missed Street expectations, with weakness primarily driven by challenges in the medium and heavy commercial vehicle (M&HCV) segment. ICICI Securities has now downgraded the stock to 'Hold' with a revised target price of ₹165, down from the previous target of ₹180, citing near-term challenges and cautious management outlook.
The company reported total sales of 14,923 units in May 2026, down 3.6% from 15,484 units in the corresponding month last year and below the CNBC-TV18 poll estimate of 16,675 units. Domestic sales declined 2.7% year-on-year to 14,148 units from 14,534 units a year ago, with the weakness led by the M&HCV segment where domestic sales fell 11.4% to 8,320 units from 9,386 units in May 2025. Within the M&HCV segment, domestic M&HCV truck sales declined 5.4% to 7,065 units, while M&HCV bus sales dropped 34.6% to 1,255 units from 1,920 units a year ago. However, the company's light commercial vehicle (LCV) business continued to outperform, with domestic LCV sales rising 13.2% year-on-year to 5,828 units from 5,148 units in the corresponding period last year.
Despite the market decline, Ashok Leyland delivered robust financial results for Q4FY26. As reported by Business Standard, the company's revenue increased 18.9 per cent year-on-year and 22.8 per cent quarter-on-quarter to ₹14,160.5 crore, driven by 17.4 per cent Y-o-Y growth in volume and 1.3 per cent Y-o-Y rise in average selling price. The company's Ebitda rose 15.3 per cent Y-o-Y and 34.6 per cent Q-o-Q to ₹2,065.5 crore, though Ebitda margin contracted 46 basis points year-on-year to 14.6 per cent despite improving 128 basis points quarter-on-quarter. Adjusted net profit increased 11.5 per cent Y-o-Y and 27.2 per cent Q-o-Q to ₹1,404.7 crore. According to ICICI Securities, the company's operating performance slightly lagged estimates but continues to report healthy profitability, led by higher net realisation and better cost efficiencies.
To counter commodity headwinds, Ashok Leyland undertook price hikes of 100-150 basis points, effective April 2026, as reported by ICICI Securities. Management has signalled near-term caution given recent fuel price hikes and even shortages in certain pockets. However, an ageing truck fleet, better total cost of ownership, uptick in freight demand post GST rate cut and increase in construction activity could cushion the CV industry's volumes. Strong traction in defence and aftermarket spares continues to support profitable growth. ICICI Securities notes that logistical challenges may strain near-term export growth, while the brokerage maintains a cautious outlook citing macroeconomic challenges including higher fuel prices, inflation, and potential interest rate increases that could slow India's GDP growth.
ICICI Securities has revised its target price to ₹165 based on 20x FY28E EPS, down from the previous target of ₹180. The brokerage maintains a 'Hold' rating, citing near-term challenges and cautious management outlook. Recent dealer surveys indicate signs of slowdown in enquiries, leading to the revised assessment. The company's management remains cautious, with CV demand trends remaining stable in April 2026 but refraining from providing volume growth guidance for FY27 amid geopolitical uncertainties and inflation concerns. ResearchBytes has now revised its recommendation to 'Reduce' with a revised fair value of ₹170, citing expectations of CV cycle growth moderation and profitability decline in FY2027E due to raw material headwinds and lack of operating leverage.
