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: Underperformer - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 22, 2003

    Ashok Leyland: Underperformer

    Ashok Leyland, the second largest commercial vehicle (CV) manufacturer in the country, has posted a poor performance for the first quarter ended June 2003. While topline has grown at a slower pace, there has been a contraction in operating margins as well. But for a sharp fall in interest expenses, net profit could have declined during the quarter.

    (Rs m) 1QFY03 1QFY04 Change
    Net sales 5,577 5,843 4.8%
    Other Income 23 18 -21.5%
    Expenditure 4,971 5,322 7.1%
    Operating Profit (EBDIT) 606 521 -14.1%
    Operating Profit Margin (%) 10.9% 8.9%  
    Interest 176 86 -51.5%
    Depreciation 257 230 -10.6%
    Profit before Tax 196 223 14.1%
    Extraordinary items (40) (6) -
    Tax 58 69 19.7%
    Profit after Tax/(Loss) 97 148 51.9%
    Net profit margin (%) 1.7% 2.5%  
    No. of Shares (m) 119.0 119.0  
    Diluted Earnings per share (Rs)* 3.3 5.0  
    P/E Ratio (x)   23.1  
    (* annualised)      

    Total volumes in 1QFY04 have increased by 9% to 8,347 units. Growth in unit sales is on the lower side compared to previous quarters on account of a 10% decline in passenger bus sales. Except for demand from private transport operators, state transport undertakings (STUs) have been postponing fresh orders for passenger buses. This seem to have affected ASOK's volumes sales in 1QFY04. Though M/HCV volumes have risen by 18%, it is lower when compared with Telco, the market leader.

    First quarter snapshot…
    (Nos) 1QFY03 % of sales 1QFY04 % of sales Change (%)
    Bus 2,556 33.3% 2,297 27.5% -10.1%
    M/HCVs 4,973 64.7% 5,880 70.4% 18.2%
    LCVs 152 2.0% 170 2.0% 11.8%
    Total 7,681 100.0% 8,347 100.0% 8.7%
    Source: Company website

    To put things in perspective, domestic sales of Telco (M/HCVs and LCVs) in 1QFY04 saw a 25% growth as compared to a 18% rise for ASOK. As a result, we expect ASOK's market share to have declined in the first quarter in line with the trend witnessed in FY03. Telco had indicated that it plans to recover its market share in the LCV segment in the medium-term, which it had lost in the late 1990s. As a result of the slower volume growth, ASOK's net sales have increased only by 5% in 1QFY04.

    Operating margins have come under pressure during the quarter. Telco has been agressively expanding its presence in the Southern market in the last one year. This could have impacted average realisation for ASOK. With expenditure rising at a faster rate compared to sales, operating profits are on the lower side. A steep fall in interest cost and lower extraordinary adjustment in 1QFY04 has translated into a 51% rise in net profit. However, if one were to remove extraordinary adjustments from the both the quarters, net profit growth stands at 12%.

    Geographical mix…
    (Nos) 1QFY03 1QFY04 Change (%)
    Domestic 7,229 7,859 8.7%
    Exports 452 488 8.0%
    Total 7,681 8,347 8.7%
    Source: Company website

    The stock currently trades at Rs 115 implying a P/E multiple of 23.1x annualised 1QFY04 earnings. We had indicated earlier that the company is likely to underperform its key competitor, Telco in FY04 on account of its regional concentration. Though the company has increased its presence in the northern region, market share continues to remain under pressure. In this context, valuations seem to be on the higher side.



    Equitymaster requests your view! Post a comment on "Ashok Leyland: Underperformer". 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...

    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


    Aug 18, 2017 (Close)


    • 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


    Compare Company With Charts