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Informist, Saturday, Jul 20, 2024

Darshan Nakhwa 

MUMBAI – Commercial vehicle manufacturer Ashok Leyland Ltd is likely to report muted growth in its bottomline for the June quarter on account of lower sales of high-margin medium and heavy trucks as General Election affected demand. The company's average selling price is also likely to be flat on year, estimates from brokerage firms show. 

The Chennai-based company's bottom line is seen up by just 1.5% on year to 5.85 bln rupees in Apr-Jun, even as its top line is expected to grow by 7.3% on year to 87.83 bln rupees, according to the average of estimates from 10 brokerages. Among the estimates, the highest projection for the company's Apr-Jun bottom line is 6.89 bln rupees and the lowest is 4.88 bln rupees. The highest and lowest estimates for revenue are 89.78 bln rupees and 86.96 bln rupees, respectively.

In Apr-Jun, Ashok Leyland's topline growth will be led by higher overall despatches, price hikes, and lower discounts, according to brokerage firms. Its overall despatches, including domestic sales and exports, rose 6.2% on year to 43,893 units during the quarter. Of these, 41,559 commercial vehicles were sold in India and 2,334 units were exported. The company reported growth in overall despatches on a low base of the year-ago quarter, when its commercial vehicle sales were hit after the introduction of a new emission norm, due to which prices of these vehicles were raised to offset higher production cost. 

In the quarter ended June, Ashok Leyland despatched a total of 27,885 medium and heavy commercial vehicles, marking a growth of 6.6% on year. The segment contributed nearly 63% of the total sales. In this segment, sales of trucks fell 2.5% on year to 21,021 units, and those of buses rose slightly over 49% on year to 6,864 units. In the light commercial vehicle category, sales rose 5.6% on year to 16,008 units. 

The company's cash profit from operations, or earnings before interest, taxes, depreciation, and amortisation, is seen at 10.16 bln rupees in Apr-Jun, according to the average of estimates from seven brokerages. The highest projection for EBITDA is 11.73 bln rupees and the lowest is 9.15 bln rupees. In Apr-Jun 2023, the company reported an EBITDA of 8.21 bln rupees. 

On the profitability front, the automaker is expected to report an expansion in EBITDA margin on year due to better operating leverage and cost optimisation. Its EBITDA margin is likely to expand to 11.4% from 10% in the year-ago June quarter, according to the average of estimates from 10 brokerages.

On the net price realisation front, Ashok Leyland is unlikely to report any change on year, due to a lower mix of medium and heavy trucks in total sales. Motilal Oswal Financial Services has projected the company's average selling price at 1.98 mln rupees per unit.

Sequentially, Ashok Leyland is expected to report weak financial performance. The company's bottom line is likely to fall by 35% on quarter, and its EBITDA is seen down by 36%. The company's top line is projected to decline by 22% on account of a similar drop in total vehicle despatches. Its EBITDA margin is also expected to contract by 270 basis points from 14.1% in Jan-Mar, due to negative operating leverage and inferior product mix, according to analysts. 

Ashok Leyland will detail its earnings for the June quarter on Jul 25. According to brokerages, the company's outlook on medium and heavy commercial vehicle demand and progress on the partial divestment of Switch Mobility will be some of the key things to watch out for.  

Ashok Leyland shares have gained nearly 5.5% since its March quarter earnings. On Friday, the commercial vehicle maker's shares closed 1.9% lower at 223.95 rupees on the National Stock Exchange.

Following are the Apr-Jun earnings estimates for Ashok Leyland, in million rupees, based on reports from 10 brokerages:

End

Edited by Deepshikha Bhardwaj

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