Ashok Leyland shares are set for the best annual returns in 10 years and Nomura sees further upside

Shares of Ashok Leyland Ltd. are trading with gains on Monday, December 22, after brokerage firm Nomura increased its price target on the stock by 12.6%. The stock is already trading at record high levels.

Nomura maintained its "buy" rating on Ashok Leyland and has raised its price target from ₹174 apiece to ₹196 per share, implying an upside potential of 12.9% from its previous closing price.

Ashok Leyland has a 31% market share in the Indian medium heavy commercial vehicles (MHCV) industry as of the financial year 2025 and it remains a key beneficiary of a strong pick-up in the industry demand, Nomura said.

Hence, it expects the automaker's MHCV volumes to grow by 10%, 10% and 6% respectively over financial year 2026, 2027 and 2028, compared to the 5%, 6% and 6% growth seen in the three previous financial years. Exports may also grow 10%, 11% and 6% respectively over the same timeframe.

Benign commodity prices, lower discounts and operating leverage should offer margin tailwinds as well, the Nomura note added. As a result, it has forecast Ashok Leyland's earnings before interest, tax, depreciation and amortisation (EBITDA) margins to be at 13.4%, 14.3% and 14.5%, over financial year 2026-2028, leading to its Earnings Per Share (EPS) growing at a Compounded Annual Growth Rate (CAGR) of 18% during this period.

Nomura has raised its enterprise value / EBITDA multiple to 13x from its previous 12x to arrive at the new price target.

Ashok Leyland remains Nomura's preferred pick in the CV sector. Its EPS estimates for the stock are 19% and 20% ahead of consensus for financial year 2027 and 2028 respectively.

Of the 45 analysts who have coverage on the stock, 34 have a "buy" rating, seven have a "hold" rating and four have a "sell" rating.

Ashok Leyland shares were trading 1.8% up at ₹176.7. The stock is up 60% so far this year, which is turning out to be not just its sixth straight year of positive returns, but also the best in a calendar year since 2015, when the stock had risen 71%.

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