Ashok Leyland posts strong Q3 numbers: LKP Research

Ashok Leyland’s Q3 results were strong as volumes grew 80% y-o-y and 6% q-o-q on the recovery in the MHCV cycle and the economy.

Launch of various products led to this growth. The company’s market share rose to 26.6% in MHCV truck segment, which was a drastic improvement from 20% y-o-y and in the bus segment, it rose 250 bps to 37.5% y-o-y.

In line with the strong volume growth, Ebitda margins saw a huge swing of from -5% in Q3 FY14 to 7.1% in Q3 FY15 on the back of improved product mix and operating leverage obtained from volume growth. Also the company mentioned they saw a slight fall in discounts.

The impact of RM prices moving down has not yet been seen in numbers due to which RM to sales were at 74.5%. Employee costs to sales fell to 8.2% from 12.3% q-o-q as the company has been restructuring in a major way. Other expenses to sales remained flat at 10.2% from 10.1% q-o-q and declined from 13% y-o-y due to tight cost control and lower ad spend. In line with a good operating performance, bottomline expanded from an adjusted loss of Rs 259 crore to a profit of Rs 32 crore.

This was also an improvement on Rs 11.6-crore profit in last quarter. ALL’s profitability rose despite high tax rate and lower other income.

Ashok Leyland’s MHCV volumes declined 29% YTDFY15 ahead of the industry growth of 10%, thus, winning a significant amount of market share. With the new government coming in, economic growth is on the path of revival thus triggering industrial activity. This has actually triggered the demand for MHCV volumes.

Ashok Leyland Limited