The first quarter of FY2026 saw Ashok Leyland (AL), India’s largest commercial vehicle manufacturer, perform well due to higher exports, operational efficiency, and market sentiment. The company improved its position in key categories despite a bad industry backdrop and is now confident.
Key Performance Highlights
- Export Growth: Shipments to other countries rose 29% year over year, with strong growth in West Asia, SAARC countries, and Africa.
- EBITDA profit Growth: The operating profit went up by 52 basis points because of a better product mix and a 152-bps drop in material costs, even though the prices of raw materials were going up.
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LCV Sales at Record Highs: The number of light commercial vehicles (LCVs) sold in the US reached 15,566 units, the highest number ever for a first quarter.
- Gains in Market Share: The MHCV share went up from 29.8% last year to 30.7% in Q1FY26. The LCV share went up by 120 bps to 12.9%.
Demand Outlook
The commercial vehicle market is starting to pick up again after a quiet period in 2024 and early 2025. It is thought that growth will be fueled by:
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Higher government spending on infrastructure
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A favorable monsoon boosting consumption demand
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Stable freight rates and better operator profitability
Buses are likely to lead the recovery, supported by pent-up demand, while tractors and trailers are also set for strong momentum.
For FY26, Ashok Leyland projects:
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Mid-single-digit growth in MHCVs
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Slightly higher growth in LCVs
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Double-digit revenue expansion overall
Defence Business: A Strong Growth Lever
Ashok Leyland’s defence vertical remains a star performer with its order book at record levels. Management expects double-digit revenue growth in FY26 and is exploring new opportunities beyond mobility solutions, strengthening its long-term positioning in the defence sector.
Expansion and Capacity Building
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New Plant, Andhra Pradesh: Recently inaugurated, expected to scale up to 200 units per month by year-end.
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Lucknow Bus Plant: Under construction, to start operations by Q3 FY26.
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Fully Built Buses: Capacity targeted to rise from 950 to 1,650 units per month.
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Overall Utilisation: Currently at ~70%, with room for growth.
Switch Mobility: Accelerating in Electric
Switch India, the EV arm of Ashok Leyland, is on a steady growth trajectory:
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Achieved breakeven at PBT level in Q1FY26 after turning EBITDA positive last year.
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Aims to achieve PAT-positive status in FY26.
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Currently holds an order book of 1,500+ electric buses, strengthening its role in India’s clean mobility space.
Competitor Comparison: Ashok Leyland vs Peers
| Parameter | Ashok Leyland | Tata Motors | Eicher Motors (VECV) | Mahindra & Mahindra |
|---|---|---|---|---|
| Market Share (MHCV) | 30.7% | ~47% | ~7% | <5% |
| LCV Market Share | 12.9% | ~40% | ~5% | ~18% |
| Export Growth (Q1 FY26) | +29% YoY | ~+18% YoY | ~+12% YoY | ~+8% YoY |
| EBITDA Margin Trend | Expanding (52 bps YoY) | Stable, under cost pressures | Moderate growth | Flattish |
| Defence Business | Strong order book, expanding | Present, but limited | Minimal | Negligible |
| EV/Alternative Fuel Focus | Strong via Switch Mobility | EV trucks & buses under development | Exploring EV partnerships | Focus on EV LCVs |
| Valuation (Forward P/E) | ~16.7x FY27E | ~18.2x FY27E | ~24x FY27E | ~21x FY27E |
Insight:
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Ashok Leyland stands out in defence and buses, while Tata Motors leads in MHCV and LCV volumes.
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Eicher (VECV) has niche strength in premium trucks but lags in scale.
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M&M is relatively stronger in small commercial vehicles but has limited presence in larger categories.
Valuation & Investment View
At a CMP of ₹121.96, Ashok Leyland’s stock trades at 16.7x projected FY27 earnings — an attractive valuation given its strong fundamentals, rising market share, and growth prospects.
Investor Takeaway:
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Short-term: Supported by demand momentum, strong defence orders, and EV traction.
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Long-term: Margin expansion, capacity additions, and leadership in buses and LCVs make AL a compelling accumulation candidate.
Conclusion:
Ashok Leyland is well-positioned to ride the ongoing recovery in the commercial vehicle industry. With stronger exports, steady domestic demand, defence momentum, and Switch India’s EV push, the company is gearing up for sustainable long-term growth. Compared to peers, it enjoys unique strengths in buses, defence, and electrification, making it an attractive choice for investors looking at India’s commercial vehicle story.
