X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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: A stellar FY15 - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Ashok Leyland: A stellar FY15
May 21, 2015

Ashok Leyland announced the fourth quarter results of financial year 2014-2015 (4QFY15). The company reported a 46% YoY growth in revenues and a net profit of Rs 2.3 bn. Here is our analysis of the results.

Performance summary
  • Net sales grow by 46% YoY in 4QFY15 led by ramp up in volumes.
  • On account of the benefit of operating leverage and cost cutting initiatives, the company's operating margins improve by 4.3% to 10.1% during the quarter.
  • Led by the strong performance at the topline and operating level, the company reports a net profit of Rs 2.3 bn in 4QFY15 as against a net loss of Rs 127 m in 4QFY14 (excluding extraordinary items during both the periods).

Financial performance: A snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Net sales 30,768 45,057 46.4% 99,434 135,622 36.4%
Expenditure 28,990 40,486 39.7% 98,265 125,355 27.6%
Operating profit (EBDITA) 1,777 4,571 157.2% 1,169 10,266 778.3%
EBDITA margin (%) 5.8% 10.1%   1.2% 7.6%  
Other income  219 372 69.8% 1,162 1,245 7.1%
Interest (net) 1,126 882 -21.6% 4,529 3,935 -13.1%
Depreciation 1,034 1,101 6.4% 3,770 4,163 10.4%
Profit before tax (163) 2,961    (5,969) 3,413  
Tax (36) 580    (1,206) 1,074  
Extraordinary item 3,761 (80)   5,057 1,009 -80.0%
Profit after tax/(loss) 3,634 2,300 -36.7% 294 3,348 1039.5%
Net profit margin (%) 11.8% 5.1%   0.3% 2.5%  
No. of shares (m)        2,660.7  2,845.9  
Diluted earnings per share (Rs)*          0.8  
Price to earnings ratio (x)*          85.6  
(* on trailing twelve months earnings and excluding extraordinary items)

What has driven performance in FY15?
  • Ashok Leyland's revenues surged by 36% YoY during FY15. The MHCV segment, in FY13 and FY14, had been badly impacted by the economic slowdown, thereby dragging Ashok Leyland's performance along with it. However, since the early part of FY15, the company has seen a healthy pick up in volumes. Indeed, policies related to the reversal of mining bans and resumption of some stalled infrastructure projects has seen healthy growth in the MHCV space during the year. There was an improvement in freight rates as well as the overall operations of fleet operators as a result of which demand for MHCVs was much better. Further, there was good growth in realizations because of falling discounts and better product mix. Despite the economic downturn, the company's focus on an enhanced product range and network expansion helped it perform well during the year.

  • ALL's operating margins improved by 6.4% to 7.6% during the year on account of benefits of operating leverage, a tight rein on costs and a better sales mix. Thus, operating profits surged to Rs 10.2 bn during FY15 as against Rs 1.2 bn in FY14.

  • Led by the strong performance at the topline and operating profit level, the company reported a net profit of Rs 2.3 bn during FY15 as against a loss of Rs 4.7 bn during FY14 (excluding extraordinary items during both the years).
What to expect?

At the current price of Rs 70, the stock is trading at a multiple of 17.9 times our estimated FY17 cash flow per share. Ashok Leyland's efforts on becoming a leaner company and improving its working capital position have been yielding results. The company has been focusing on reducing debt and in this regard it has been selling off non-core assets and also intends to go slow on capex for the next couple of years. Ashok Leyland has also invested in strengthening its distribution reach over the last several years and this is now beginning to reap benefits especially with the gradual recovery in the economy.

Having said, assuming that the company's performance considerably ramps up on account of a recovery in the economy which translates into a rise in volumes, valuations do not leave much upside on the table for investors. And hence our view is that investors not buy the stock of Ashok Leyland at current price levels.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ASHOK LEYLAND SHARE PRICE


Jan 19, 2018 (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 - M&M COMPARISON

COMPARE ASHOK LEYLAND WITH

MARKET STATS