Ashok Leyland logo. | Photo Credit: BIJOY GHOSH

Shares of Ashok Leyland declined on Friday after an initial rise, as concerns over commodity inflation, rising fuel prices and uncertain truck demand weighed on investor sentiment despite the company reporting a strong March quarter performance.

The stock rose 1.2 per cent in early trade to ₹165.70 against the previous close of ₹163.62 before reversing gains to close 5 per cent lower at ₹155.44 on the NSE.. The reaction came as investors assessed the impact of higher steel prices and macroeconomic uncertainties on margins and commercial vehicle demand in FY27.

Ashok Leyland reported an 11 per cent y-o-y increase in consolidated net profit for the quarter ended March 31, 2026, at ₹1,381 crore. Management struck a cautiously optimistic tone for FY27, highlighting resilient commercial vehicle demand drivers such as fleet replacement and GST-linked benefits, while cautioning about global economic uncertainties, commodity price volatility and rising diesel prices.

The company expects industry-level commercial vehicle performance in Q1 FY27 to improve over the year-ago period, although management indicated that demand in the light commercial vehicle and intermediate commercial vehicle segments may moderate from Q4 FY26 levels. Heavy-duty truck demand, however, is expected to improve, supporting product mix.

Ashok Leyland said sharp increases in commodity costs, particularly steel, could pressure margins in the near term. To offset the impact, the company has implemented a 1-1.5 per cent price hike and is focusing on cost-control measures, although it remains uncertain whether the price increase can be sustained through the quarter.

Management guided FY27 capital expenditure at ₹750 crore-₹1,000 crore. Investments in subsidiaries will remain need-based, with Hinduja Leyland Finance, Hinduja Housing Finance and OHM Mobility potentially requiring growth capital. Switch Mobility India has turned profitable and is now in a comfortable position financially, management said.

The defence business is expected to maintain its 20 per cent growth trajectory over the next two to three years, backed by an executable order book exceeding ₹1,500 crore. The company also expects momentum in non-vehicle revenues to continue into Q1 FY27.

Brokerages divided

Brokerages remained divided on the stock following the earnings announcement.

Morgan Stanley maintained an equal-weight rating with a target price of ₹180, saying Q4 results were broadly in line with expectations. The brokerage said demand remained resilient but inflationary headwinds and commodity cost pressures needed monitoring. It also highlighted that Switch Mobility had turned profitable and noted the company’s plans to begin battery pack manufacturing.

Jefferies maintained a hold rating and cut its target price to ₹160 from ₹190, citing uncertainty in truck demand and pressure on margins. The brokerage reduced its FY27 and FY28 earnings estimates by 5-8 per cent due to rising fuel prices, higher inflation risks and weak monsoon concerns that could weigh on economic activity.

JPMorgan retained its neutral rating and raised the target price to ₹175, saying pricing discipline was likely to continue amid volatile demand trends and underlying demand drivers remained resilient despite fluid macro conditions.

Meanwhile, Citi maintained a buy rating with a target price of ₹205, stating that Q4 results were slightly ahead of estimates and the long-term outlook remained positive despite expectations of some moderation in near-term demand.

Among domestic brokerages, Choice Institutional Equities upgraded the stock to buy and revised its target price to ₹195 from ₹225. The brokerage said premium product launches, improving export volumes and a robust defence pipeline strengthened long-term growth visibility, although commodity inflation and diesel price volatility could impact near-term margins.

Motilal Oswal reiterated its buy rating with a target price of ₹188, stating that geopolitical uncertainties could temporarily affect commercial vehicle demand and margins, but expected normalisation from the second half of FY27. The brokerage expects Ashok Leyland to post a revenue, EBITDA and profit after tax CAGR of 10 per cent, 12 per cent and 15 per cent, respectively, over FY26-28.

Published on May 29, 2026