Ashok Leyland leaps 10% post-Q1 nos; Co expects the margin to improve ahead
Shares of Ashok Leyland surged 10 per cent to Rs 59.30 on the BSE on Thursday after the company said it expects Q3 and Q4 of the financial year 2020-21 (FY21) to be better than the previous quarter while margins are also expected to rise going ahead.
Meanwhile, the company reported a consolidated net loss of Rs 388.82 crore for the first quarter ended June 30, owing to the coronavirus pandemic. In comparison, the commercial vehicle maker had posted a net profit of Rs 274.96 crore in Q1FY20.
Revenue from operations in April-June 2020 significantly declined to Rs1,486.04 crore as compared with Rs 6,588.23 crore in the year-ago period, Ashok Leyland said in a regulatory filing.
“With the pandemic hitting us, this has been one of the most challenging quarters for the industry. The company saw a significant decline in volumes, affecting the financial performance adversely,” Ashok Leyland MD and CEO Vipin Sondhi said.
Despite challenging times, the company went ahead and launched the modular business platform that gives customers the flexibility to choose vehicles as per their requirements, he said, adding that it will “a game-changer in the industry”.
In a post-earnings conference call on Thursday, the company said that demand has picked up with demand improvement visible in the light commercial vehicle sector, CNBC TV18 reported.
” Industry truck fleet capacity utilisation is at 50-55 per cent currently; demand for trucks will rise only when infra projects pick up. We expect Q3 and Q4 to be better than previous quarters,” the company said, as per the report.
Further, the company said it has adequate liquidity with 15-20 per cent price increase already implemented. “Margins to be much higher going ahead due to cost-cutting, and will see Rs 500-600 crore of CAPEX in FY21,” it said.
At 12:10 PM, the stock was trading 7.32 per cent higher at Rs 57.90 on the BSE as compared to a flat S&P BSE Sensex. Around 12.13 crore shares have already changed hands on the NSE and BSE combined.
Motilal Oswal, which has a ‘BUY’ rating on the stock, said that Ashok Leyland’s gross margins improved around 580 bps YoY (+700bp QoQ) to 35.9 per cent as against estimated 28.8 per cent owing to a better mix.
Further, “Ashok Leyland, reported Ebitda loss of around Rs 330 crore due to operating de-leverage. The stock currently trades at FY22E 11.1x EV/EBITDA and 2.1x P/BV,” it said.