Ashok Leyland shares correct after costs play spoilsport in Q3

Ashok-Leyland

Ashok Leyland Ltd saw significant improvement in performance during the December quarter. The pick up in economic activities did help the company see sales volumes grow 7.1% year-on-year.

After eight continuous quarters of de-growth, the MHCV (medium and heavy commercial vehicle) truck has registered a year-on-year (y-o-y) growth of 16% in Q3. The company reported strong truck volume growth that was twice the rate of the industry. In Q3 FY21, the firm’s trucks market share has therefore grown to 28.1% against 24.9% in Q3, FY ’21. Ashok Leyland’s overall Q3 volumes grew by 7% y-o-y.

The net realization saw a 12% y-o-y rise. This coupled with rising volumes, the revenues of the company could also increase by about 20 % y-o-y. The revenues for the quarter stood at Rs. 4814 crores as against Rs. 2837 crores in Q2 FY21 and Rs. 4016 crores in the same period last year.

Though the company’s Ebitda grew 13% y-o-y to about ?254 crore, it fell short of Street expectations. The rising cost of key raw materials has led to pressure on the margins as employee costs also remain elevated.

Ebitda came 30% below estimates though due to lower-than-expected margins said analysts at Jefferies India Limited. Gross margin fell 3.2 basis points; Ebitda margin still rose 2.4 percentage points sequentially to 5.3% led by operating leverage.

With the margins coming below expectations, the net profits also disappointed.

The company reported a net loss of ?19 crore for Q3 FY’21 (this includes a one-time VRS cost of ?85 crore), as against a net loss of Rs. 147 crores in Q2 FY21 and a net profit of Rs. 28 crore in Q3 FY20. The company has also brought down net debt to ?2,880 crore in Q3 from ?3,076 Crores in Q2 FY21, further strengthening the balance sheet of the company.

The analysts say that with the MHCV segment seeing good growth and should improve further with the government focus on boosting infrastructure activities, LCV/ICV segment is also seeing decent recovery driven by demand for last-mile connectivity. Tipper and construction-related vehicle sales have also seen improvement led by robust demand. However, the bus segment is yet to see an improvement in sales. The rising diesel prices, lower fleet utilization (70%) and weak financial condition of fleet operators continue to impact their buying appetite in the near term said analysts at Dolat Capital Market Pvt. Ltd.

The stock prices were down more than 4% in the morning trades on Friday

News Source:- Livemint

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