Is Ashok Leyland share price ready to break its sideway range?
Stock is in momentum due to a few fundamental reasons.
Despite the market having remained flat with a negative bias for the last two months, shares of Ashok Leyland have risen by almost 50% from Rs 93.3, observed on 8 March 2022 to Rs 140 today on 25 May 2022. This rally is fuelled by various factors. These factors are - strong quarterly results posted by the company, steel prices are set to decline domestically and an excise duty cut on petroleum products.
Ashok Leyland has delivered strong Q4 results. The company’s revenue for Q4 was reported at Rs 8,744.3 crore, nearly up 24.82% on a YOY basis. The company’s consolidated net profit also improved for Q4 FY22, reported at Rs 901.4 crore, nearly 274% higher on a YOY basis.
Steel prices have declined in the global and domestic markets. The government has also decided to cut excise duty on petroleum products. This decline in steel price is positive for the company as its input price will decrease, improving its operating profit margins.
Management plans for investing around Rs 2000 crore over the next five years under the Production Linked Incentive (PLI) scheme to grow alternative fuel segments for their vehicles. This can help the company improve its sales figures in future. Company’s domestic market share for the medium and heavy commercial vehicle (M&HCV) segment also improved from 28.9% in FY21 to 30.6% in FY22.
The stock price has been trading in a wide sidewise range for the last one year. Strong upward momentum in stock fueled by the strong fundamental news for the company might help the stock to break its sideways action on the upside.
Ashok Leyland is a multi-national auto manufacturer, headquartered in Chennai. The company is the 2nd largest manufacturer of commercial vehicles in India, the 4th largest manufacturer of buses in the world, and the 19th largest manufacturer of trucks. The company has a market capitalization of Rs 41,390.93 crore and the stock price is trading at Rs 141 on 25 May 2022.
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