Ashok Leyland, the No. 2 in the commercial vehicle segment, has reported a dissappointing third quarter performance. Despite the recent rise in commercial vehicle (CV) sales, turnover for the company has fallen by 15%. While margins have increased, higher tax outgo has resulted in a sharp fall in profits.
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Sales have fallen sharply in the third quarter due to lower offtake by the state transport undertakings. Though medium and heavy commercial vehicle (M/HCV) demand had shown signs of improvement, the drop in volumes indicate that Ashok Leyland might have lost market share in this segment. To put things in perspective, Telco, during the same period, reported a 6% rise in M/HCV volumes.
However, a favorable product mix and continuous gains in operational efficiencies have enabled the company to improve margins from 12% in 3QFY01 to 15% in 3QFY02. For the first nine months of the current fiscal, operating margins have gone up by 80 basis points.
Net profit in 3QFY02 has declined by 30% to Rs 135 m primarily on account of higher provisioning towards deferred taxation. The stock currently trades at Rs 74 implying a P/E multiple of 19.4x annualised nine months earnings.
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