Our target price of Rs270 for Ashok Leyland is based on 15x FY26E (Mar'25E) EV / EBITDA. Ashok Leyland management has made efforts over the past few years to increase its market share, improve margins, and increase cash balance. Our target multiple is ~5% above the average 1-year-forward EV/EBITDA multiple the stock has traded at over the last five years, based on consensus estimates (Source: Bloomberg). While we might be past peak cycle for CVs in India, we could see market-share gains for Ashok Leyland, driven by new model launches as well as improving profitability trends due to better mix (more buses).

Key downside risks that could prevent the stock from reaching our target price include: 1) continued sharp decline in MHCV volumes, 2) lackluster response to new LCV models, 3) increased proportion of LCVs negatively impacting margins, and 4) escalation in competitive intensity, resulting in higher discounts and thus lower margins.