The analysts at Emkay say that Ashok Leyland`s Q2FY09 numbers were ahead of their expectation at operating level. While the net sales at Rs 18.7 billion (6.9% YoY growth) was in line with the expectation, adjusted EBIDTA at Rs 1.5 billion (6.1% YoY decline) was ahead of the estimates by 10%.
Analysts say that the strong operating performance vis a vis expectation was largely due to significant accretion to the inventory. Despite the strong operating performance, the analysts have revised their FY09 and FY10 EPS estimates by 13.3% and 15.5% to Rs 3.1 and Rs 3.5 respectively due to downward revision in their volume estimates. They have revised the target PER multiple from 9x to 7x. The downward revision in valuations is to factor in the increasing near term risks to earnings arising from much sharper volume declines than what they have factored in.
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