Ashok Leyland: Underperformer - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

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

Ashok Leyland: Underperformer

Jul 22, 2003

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

The BSE AUTO Index Down 2% ; ASHOK LEYLAND Among Top Losers (Market Updates)

Sep 24, 2020 | Updated on Sep 24, 2020

The BSE AUTO Index Down at 17,213 (down 2.1%). Among the top losers in the BSE AUTO Index today are ASHOK LEYLAND, TATA MOTORS and MOTHERSON SUMI. Meanwhile, the BSE Sensex has plunged 1.4% to 37,304.

ASHOK LEYLAND Announces Quarterly Results (3QFY20); Net Profit Down 92.7% (Quarterly Result Update)

Feb 17, 2020 | Updated on Feb 17, 2020

For the quarter ended December 2019, ASHOK LEYLAND has posted a net profit of Rs 278 m (down 92.7% YoY). Sales on the other hand came in at Rs 40 bn (down 36.5% YoY). Read on for a complete analysis of ASHOK LEYLAND's quarterly results.

ASHOK LEYLAND Announces Quarterly Results (2QFY20); Net Profit Down 91.5% (Quarterly Result Update)

Nov 12, 2019 | Updated on Nov 12, 2019

For the quarter ended September 2019, ASHOK LEYLAND has posted a net profit of Rs 389 m (down 91.5% YoY). Sales on the other hand came in at Rs 39 bn (down 48.4% YoY). Read on for a complete analysis of ASHOK LEYLAND's quarterly results.

ASHOK LEYLAND 2018-19 Annual Report Analysis (Annual Result Update)

Sep 16, 2019 | Updated on Sep 16, 2019

Here's an analysis of the annual report of ASHOK LEYLAND for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of ASHOK LEYLAND. Also includes updates on the valuation of ASHOK LEYLAND.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

ASHOK LEYLAND SHARE PRICE


Sep 24, 2020 10:49 AM

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

COMPARE ASHOK LEYLAND WITH

MARKET STATS