Ashok Leyland, the Chennai-based truck and bus maker, has not given up on its maiden passenger vehicle venture, despite poor sales. Its multi-seater Stile van saw sales of only 311 units in the April 2014-January 2015 period, less than half the same period of the previous year, when it was 694 units.

This is the first time India’s second largest heavy truck maker has plunged into the personal vehicle segment, with no prior experience.

Chennai-based truck and bus maker Ashok Leyland has not given up on its maiden car venture, for which it piggy-backed on Japanese giant Nissan, despite extremely poor sales.

The multi-seater van Stile saw sales of just 311 units in the April-January period, which has more than halved compared to the same period previous year that witnessed sales 694 units.

Maintain buy on Ashok Leyland (AL) and raise target price to Rs 77. We value the standalone business at R71.7 per share based on 9x FY17f ebitda of R2,560 crore. Our target price moves up due to 23% increase in our FY17f ebitda estimates; lower net debt of R2,650 crore in FY16f versus R3,380 crore earlier due to strong profitability and some non-core asset sale; roll forward to March 2016 from November 2015 earlier and inclusion of value of Optare and Hinduja Energy as the company is looking to unlock value by divesting stakes in these companies.

Ashok Leyland’s Q3 results were strong as volumes grew 80% y-o-y and 6% q-o-q on the recovery in the MHCV cycle and the economy.

Launch of various products led to this growth. The company’s market share rose to 26.6% in MHCV truck segment, which was a drastic improvement from 20% y-o-y and in the bus segment, it rose 250 bps to 37.5% y-o-y.

Ashok Leyland Ltd reported an abnormally high jump in profit for the December quarter, although investors were not impressed. In the year-ago December quarter, it reported an operating loss amounting to 5% of revenue. Last quarter, operating profit rose to 7.1% of revenue on the back of a 72% jump in net revenue.

But analysts had estimated an ever higher profit margin of 7.4%, more or less in line with the margins the company had reported for the September quarter. Besides, Ashok Leyland trades at steep valuations of 10 times enterprise value to Ebitda, based on estimates for 2016-17. Ebitda, or earnings before interest, taxes, depreciation and amortization, is a key measure of profitability.

Shares of Ashok Leyland were trading higher by 3% to Rs 62, its new high on BSE, on back of heavy volumes.

Till 0937 hours, a combined 11.91 million shares have already changed hands on the counter on the BSE and NSE.

Shares in Ashok Leyland has surged 6% to Rs 56.50, also its record high on BSE, after the company said it has reported 48% year-on-year jump in total sales at 9,290 units in December 2014. Auto major had sold 6,275 units during the same month of 2013.

Sales of medium and heavy commercial vehicles soared 85% in December 2014 to 7,210 units as against 3,890 units sold during the same month of previous year, Ashok Leyland said in a statement.

Auto major Ashok Leyland reported 48% jump in sales at 9,290 units in December 2014.

The Hinduja Group company had sold 6,275 units during the same month of 2013.

Commercial vehicle manufacturer Ashok Leyland is planning to start manufacturing and marketing its electric and hybrid buses in India from next year, in line with the Prime Minister Narendra Modi's Make in India campaign.

Speaking to the reporters during the visit of Vince Cable MP, UK Secretary of State for Business, Innovation and Skills, to the company headquarters, Vinod Dasari, managing director of Ashok Leyland, said that Optare, the company's arm in UK, has been leading the electric and hybrid vehicle manufacturers there and its intention is to bring the Optare products to India.

Ashok Leyland has been adopting various strategies to cut the debt in its books, from reducing working capital to reducing manpower, selling off non-core assets, however, the best way to do is perhaps by increasing profits.

Vinod Dasari, managing director of the Hinduja Group company hopes that as the market turns around, the company would make some profits.

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