Ashok Leyland rallies 5% on bagging order for 1,400 school buses in UAE

Shares of Ashok Leyland hit a 52-week high of Rs 161.75 and rallied 5 per cent on the BSE in Thursday’s weak market after reports said the company has bagged an order for 1,400 school buses in the UAE, which is its largest ever school bus order. 

The total fleet deal for the GCC-made buses has been bagged by Chennai-based Ashok Leyland's UAE distribution partners, Swaidan Trading - Al Naboodah Group. Most of the supplies will be made to Emirates Transport and STS Group, a statement from the company said. However, the value of the order was not disclosed, PTI reported. CLICK HERE FOR FULL REPORT

The stock surpassed its previous high of Rs 158.15 touched on August 1, 2022. It was trading close to its record high of Rs 168 touched on May 8, 2018. In the past six months, the stock has surged 34 per cent as against a 5 per cent rise in the S&P BSE Sensex.

At 09:52 am; Ashok Leyland was trading 3.3 per cent higher at Rs 159.10 as compared to a 0.92 per cent decline in the benchmark index. The average trading volumes on the counter jumped 1.5 times, with a combined 17 million equity shares having changed hands on the NSE and BSE.

Ashok Leyland said the demand for medium & heavy commercial vehicle (MHCV) trucks is expected to increase, driven by pickup in fleet utilization levels and supported by replacement demand in-line with recovery in economic activity and government spending on infrastructure.

In the MHCV Bus segment, growth is expected to make a comeback with the reopening of schools and offices and the gradual return to normalcy after the pandemic and an uptick in tender orders by STUs. In ICVs, growth is expected to pick up from the e-commerce sector with a progressive shift to more CNG-powered vehicles, the company said in its FY22 annual report.

The Indian commercial vehicle industry is optimistic about growth prospects for FY23 given favorable growth drivers despite fuel inflation, possibility of new Covid variants, chip shortages and geopolitical issues, Ashok Leyland said.

Meanwhile, analysts at Nirmal Bang Equities have ‘buy’ rating on Ashok Leyland with a target price of Rs 17 per share.

“We see Ashok Leyland to be a key beneficiary of the commercial vehicle (CV) cycle recovery and expect further expansion in margins amid an improving product mix, softening raw material prices and operating leverage benefits. However, competitive intensity remains high, preventing full pass-through of elevated input prices to end customers and leading to higher discounts,” the brokerage said in a conference update.