6 days ago

Brokerages bet on Ashok Leyland’s resilience amid macroeconomic speed bumps

​Automotive manufacturer Ashok Leyland’s management views the underlying commercial vehicle (CV) demand as resilient, supported by recent Goods and Services Tax (GST) rationalisation. Further, a robust replacement cycle for an ageing industry fleet would also come to its aid, brokerage firm Ambit said in a note.

Ambit: Resilient Demand

The Light Commercial Vehicle (LCV) and Intermediate and Light Commercial Vehicle (ILCV) segments may see slight moderation compared with the fourth quarter, while Medium and Heavy Commercial Vehicle (MHCV) trucks are expected to see strong traction, it said.

The demand will largely be driven by tippers and trailers servicing mining belts and infra projects, Ambit said, adding large fleet operators are currently sticking to their 12-18-month expansion plans despite the macroeconomic uncertainty.

The management expects operators can easily pass on upto ₹10-15 per litre fuel price hike without significant impact on demand.

Ashok Leyland would face material cost inflation headwind (driven by steel, aluminium and copper) in the first quarter. To offset some part of inflation, the company has taken modest 1-1.5 per cent price hike in April.

ICICI: Cautious Optimism

Ashok Leyland’s management indicated that growth momentum fuelled by GST cut continued in the fourth quarter, with its sales growing at 17 per cent YoY for the domestic MHCV, and 23 per cent for LCV segments, according to an ICICI Securities’ report.

The commercial vehicle manufacturer indicated that the underlying demand continues to remain resilient. However, availability of fuel in certain pockets and the impact of fuel price hike) remain the “key monitorable”.

Based on this, the company remains cautiously optimistic on domestic CV demand going ahead, it added.

Ashok Leyland expects its exports demand momentum to continue driven by healthy traction in markets such as the Gulf Cooperation Council (GCC), the South Asian Association for Regional Cooperation (SAARC), and Africa.

However, logistical challenges may impact export volumes in the near-term, the brokerage firm said, quoting the company’s management.

The firm’s management indicated that commodity price inflation is likely to persist in the near term and expects calibrated price hikes (100-150 bps price in April ​2026), richer mix, and cost-control initiatives to support margins. 

Nomura: Macroeconomic Pressures

Despite drivers in place, Ashok Leyland management maintains a “cautious optimism” for medium and heavy commercial vehicles (MHCV) for FY27, due to macroeconomic challenges, according to Japanese brokerage Nomura said.

So far, the fuel hikes have not had much impact on demand. Even a ₹10-15 per litre fuel hike can be passed on by freight operators. Even if demand dips, it will again recover due to replacement need. The demand for Intermediate Commercial Vehicles (ICV) and Light Commercial Vehicles (LCV) is likely moderate, while that of tippers could pick up, it added.

On the exports front, the demand is good but sales may decline in the first quarter due to logistics challenges. Defense—Revenue was at ₹1,200 crore, a 20 per cent year-on-year rise, and pipeline is at ₹1500 crore.

The company is aiming to receive many more orders in the next two-three years. Meanwhile, its electric vehicle (EV) arm, ‘Switch’, currently holds an order book of 1,600 units.

The rise in commodity cost was neutralised in the fourth quarter of FY26 through cost reduction, but there will be pressure in the first quarter of FY27. The operational cost and conversion costs will rise as well, while a weak rupee can also add to cost pressures. The firm’s capex for FY27 would be about ₹750-1,000 crore.

Motilal: Robust Infrastructure

According to Motilal Oswal, the demand outlook for Ashok Leyland remains strong for mining, infrastructure and construction-linked applications, particularly tippers, multi-axle vehicles and tractor trailers.

Mining-linked demand is expected to remain robust across Maharashtra, Odisha, Chhattisgarh, Jharkhand and West Bengal. However, the CV demand trends have remained strong in the third quarter, fourth quarter and April, with no significant slowdown visible in either M&HCV or LCV segments.

Fleet operators maintain their expansion and replacement plans despite near-term operating challenges. However, management refrained from giving any volume growth guidance for FY27.

Ashok Leyland has taken a 1 per cent price hike in January 2026 and a further 1.5 per cent hike in April 2026 to pass on input cost pressure. However, commodity inflation, particularly in steel, remains a significant challenge in the first quarter of FY27, with management expecting pressure on margins from rising raw material costs.

The company maintained FY27 capex guidance at ₹750-1,000 crore, Motilal Oswal added.

HDFC: Global Uncertainty

“While management indicated that fleet operators are still firm on their medium-term plan of replaci​ng ageing fleets, we remain cautious due to the rising uncertainty around demand drivers for domestic and export markets, as a result of global geopolitical tensions,” HDFC Securities said.