X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Ashok Leyland: Changing mix - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 8, 2002

    Ashok Leyland: Changing mix

    Ashok Leyland (ASOK), the No. 2 Indian commercial vehicle (CV) producer, has reported a marginal rise in sales and net profits for the fiscal year ended March 31, 2002. Given the challenging economic scenario, the company's attempt to diversify its revenues stream seems to be paying off.

    (Rs m) FY01 FY02 Change
    Net sales 22,523 22,612 0.4%
    Other Income 102 180 -0.3%
    Expenditure 19,834 19,773 75.6%
    Operating Profit (EBDIT) 2,689 2,839 5.6%
    Operating Profit Margin (%) 11.9% 12.6%  
    Interest 888 743 -16.3%
    Depreciation 884 954 7.9%
    Profit before Tax 1,019 1,322 29.7%
    Tax 103 400 289.4%
    Profit after Tax/(Loss) 917 923 0.6%
    Net profit margin (%) 4.1% 4.1%  
    No. of Shares (m) 118.9 118.9  
    Diluted Earnings per share 7.7 7.8  
    P/E Ratio (x)   13.5  

    ASOK is the market leader in the passenger bus segment and is the key supplier to many of the state transport undertakings (STUs) in India. While its overall market share in the bus segment is 50%, in the STU category, ASOK enjoys a 60% share. However, in FY02, most of the STUs lowered vehicle expansion plan and industry volumes plummeted by 42%. As a result, ASOK's volumes stood at 8,422 units as compared to 12,486 units in FY01, a decline of 33%.

    Market share details…
    (Nos) FY00 FY01 FY02
    Industry 106,261 82,071 84,098
    ASOK 35,374 29,706 27,247
    Market share 33.3% 36.2% 32.4%

    Besides, there has been notable shift in demand as well. While there was a contraction of demand in Southern market, volumes increased notably in Northern states. Contribution from Southern states, as a percentage of CV volumes fell to 28% in FY02 (34% in FY01). Given ASOK's market leadership in southern states like Tamil Nadu, it had an adverse effect on the company's sales. The dismal performance of the bus segment resulted in lower share in the delivery vehicle segment for ASOK.

    The sales mix...
    (Nos) FY01 FY02 Change (%)
    Passenger 12,486 8,422 -32.5%
    Goods 17,393 18,413 5.9%
    Sub-total 29,879 26,835 -10.2%
    % of total 92.0% 90.4%  
    Defense 185 668 261.1%
    % of total 0.6% 2.3%  
    Exports 2,411 2,170 -10.0%
    Total 32,475 29,673 -8.6%

    Despite a 9% fall in volume, sales grew marginally indicating a sharp spurt in average realisation. This was primarily on account of shift to higher tonnage vehicle sales and increased contribution from defense sales, where realisations are significantly higher. Just to put things in perspective, average realisation for the company in FY01 for CVs was around Rs 0.6 m whereas it was as high as Rs 1.5 m for defense vehicles. Operating margins have gone up by 70 basis points and this was primarily led by favorable change in inventory thus lowering operating expenses. Interest costs were lower by 16% as the company is estimated to have retired debt to the tune of Rs 1.8 bn during the year. We expect the company to retire debt worth Rs 2 bn over the next two years and interest costs would continue to show a downward trend. However, higher tax outflow on account of deferred taxation resulted in subdued growth in net profits for FY02.

    The outlook for the CV segment in the coming fiscal in encouraging with demand expected to rise by 6%, more favorably towards higher tonnage and multi-axle vehicles. The company's strategy of Hino engine vehicles have received good response from operators and ASOK has plans to add variants to the existing product offerings. It has developed a Hino based CNG engine for buses, which is slated for introduction soon. Given the company's market leadership in the passenger bus segment, this is expected to be one of the key growth drivers in the future. Following Delhi, a number of other states have proposed to introduce CNG-based vehicles, which augurs well for the company. Besides, the company expects STUs to resume vehicle purchases in the current year. ASOK has also been key supplier to Africa and Bangladesh (mostly in CKD) and we expect the contribution to touch almost 14% of sales in the long run.

    But at the same time, Telco has made significant progress in the Southern markets and as a result ASOK's leadership could be affected. Though the company has been increasing its presence in the Northern markets, it is on the lower side. On the higher tonnage segment, Volvo is emerging as one of the strong contenders and their volumes have been growing at a healthy rate. ASOK has ventured into manufacturing of defense vehicles, which has received a number of orders, both from the domestic and international markets. The stock currently trades at Rs 105 implying a P/E multiple of 13.5x FY02 earnings.

     

     

    Equitymaster requests your view! Post a comment on "Ashok Leyland: Changing mix". Click here!

      
     

    More Views on News

    Ashok Leyland: Recovery backed by Aggressive Discounting! (Quarterly Results Update - Detailed)

    Mar 21, 2017

    Ashok Leyland Limited has announced its financial results for the third quarter of the financial year 2016-17 (2QFY17).

    Ashok Leyland: Volume woes! (Quarterly Results Update - Detailed)

    Nov 16, 2016

    Volume woes!

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ASHOK LEYLAND SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ASHOK LEYLAND

    • Track your investment in ASHOK LEYLAND with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ASHOK LEYLAND 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE ASHOK LEYLAND WITH

    MARKET STATS