Earnings Outlook
Better sales mix may lift Ashok Leyland PAT, sales to fall
This story was originally published at 11:52 IST on 7 February 2025
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KOLKATA – Commercial vehicles maker Ashok Leyland Ltd. is expected to report price-driven revenue in Oct-Dec but falling sales volume could lead to a decline in topline. However, better sales mix could lead to growth in profit.
The company is expected to report a 15.5% on-year growth in net profit to INR 6.7 billion, but sales is expected to fall by 2.4% on year to INR 90.5 billion, according to the average of estimates from 15 brokerages. On a sequential basis, the bottom line could fall by 13.0%, and top line could increase by 3.2%.
Ashok Leyland reported a net profit of INR 5.8 billion in Oct-Dec of 2023-24 (Apr-Mar) and INR 7.7 billion in Jul-Sept. The top line was INR 92.7 billion in the December quarter of FY24 and INR 87.7 billion in Jul-Sept.
The company will declare its earnings for Oct-Dec on Wednesday.
Among the brokerages, YES Securities (India) Ltd. has the highest net profit projection for the company at INR 7.4 billion, and Sharekhan Ltd. has the lowest at INR 6.1 billion. The highest topline forecast is by Anand Rathi Share and Stock Brokers Ltd. at INR 92.9 billion, and the lowest by Incred Research Services Pvt. Ltd. at INR 85.2 billion.
Although all brokerages agree that Ashok Leyland will report a decline in sales volume, their projections are based on the extent of price increase, the discounts which the company offered, and the sales mix that could aid bottom line growth.
Axis Securities Ltd. said that Ashok Leyland could report a 2% on-year fall in its revenue. Kotak Institutional Equities is also of a similar view. However, favourable product mix and higher share of non-automotive business could aid the top line on a sequential basis.
However, brokerage firms Motilal Oswal Financial Services Ltd., Prabhudas Lilladher Pvt. Ltd., and YES Securities (India) Ltd. expect overall volumes to have declined 1.4% on year due to subdued demand across most of the underlying industries. However, the extent of this impact on revenue varies among these brokerages.
Ashok Leyland is expected to report earnings before interest, tax, depreciation, and amortisation of INR 10.9 billion, according to the average of estimates from 13 brokerages. YES Securities pegs the EBITDA the highest at INR 11.6 billion, and Incred Research the lowest at INR 10.1 billion. The company may benefit from lower input costs which could improve EBITDA margins.
YES Securities expects EBITDA margin to expand to 12.7%, up by 70 basis points on year and up by 110 basis points on quarter on account of lower raw material costs. Nuvama Wealth Management Ltd., which projected a flat revenue, expects the margins to expand mainly due to better pricing and mix.
However, some brokerages expect a decline in operating margin as well. Axis Securities projects the EBITDA margin to decline by 50 basis points on year due to negative operating leverage, higher appraisal costs being partially offset by cost control efforts, higher mix of non-auto segment and decline in steel prices over the last one year.
Kotak Institutional Equities, which expects the EBITDA margin to remain flat on year, reasoned that higher non-auto mix and commodity tailwinds will help improve margins, but it will be offset by negative operating leverage and unfavorable pricing.
Around the current price, the stock is down 2% after the company announced its September quarter earnings on Nov. 8. On the day the company declared it Jul-Sept results, the stock rose by nearly 3% and closed at nearly INR 222 after hitting an intra-day high of INR 222.7. At 1147 IST on Friday, shares of Ashok Leyland were at INR 214.40 on the National Stock Exchange, up 2.2% from Thursday.
Following are the Oct-Dec earnings estimates for Ashok Leyland based on reports from 15 brokerage firms in the descending order by the estimate of net profit:
Broker Name | Net Sales (in million rupees) | Net Profit (in million rupees) | EBITDA (in million rupees) |
YES Securities (India) Ltd | 91,350.00 | 7,431.00 | 11,567.00 |
Nuvama Wealth Management Ltd | 92,343.00 | 7,160.00 | 11,308.00 |
Anand Rathi Share and Stock Brokers Ltd | 92,872.00 | 7,022.00 |
|
Elara Securities (India) Pvt Ltd | 89,187.00 | 6,917.00 | 10,613.00 |
KR Choksey Research | 90,113.00 | 6,916.00 | 11,174.00 |
Kotak Institutional Equities | 90,971.00 | 6,820.00 | 10,918.00 |
Axis Securities Ltd | 90,860.00 | 6,800.00 | 10,440.00 |
Prabhudas Lilladher Pvt Ltd | 91,873.00 | 6,671.00 | 11,117.00 |
Nirmal Bang Equities Pvt Ltd | 90,875.00 | 6,564.00 | 11,087.00 |
Emkay Global Financial Services Ltd | 90,944.00 | 6,534.00 | 10,822.00 |
HSBC Global Research | 89,861.00 | 6,529.00 | 10,783.00 |
JM Financial Institutional Securities Pvt Ltd | 90,146.00 | 6,479.00 | 10,705.00 |
Motilal Oswal Financial Services Ltd | 90,525.00 | 6,310.00 | 10,553.00 |
Incred Research Services Pvt Ltd | 85,232.00 | 6,193.00 | 10,143.00 |
Sharekhan Ltd | 89,950.00 | 6,100.00 |
|
Average | 90,473.47 | 6,696.40 | 10,863.85 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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