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)1QFY031QFY04Change
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 sales1QFY04% of salesChange (%)
Bus2,55633.3%2,29727.5%-10.1%
M/HCVs4,97364.7%5,88070.4%18.2%
LCVs1522.0%1702.0%11.8%
Total7,681100.0%8,347100.0%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)1QFY031QFY04Change (%)
Domestic7,2297,8598.7%
Exports4524888.0%
Total7,6818,3478.7%
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 2020-21 Annual Report Analysis (Annual Result Update)

Oct 19, 2021 | Updated on Oct 19, 2021

Here's an analysis of the annual report of ASHOK LEYLAND for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of ASHOK LEYLAND. Also includes updates on the valuation of ASHOK LEYLAND.

Ashok Leyland Zooms 9% After Company Turns Profitable in March Quarter (Views On News)

Jun 25, 2021

Ashok Leyland shares rallied as the company turned profitable in the fourth quarter owing to recovery in sales.

Massive Surge in the Shares of Tata Motors Today. Key Factors Favouring the Rally (Views On News)

Oct 13, 2021

Tata Motors zooms 23% after report of TPG investing Rs 75 bn in EV arm.

India's Edge in Electric Vehicle Stocks podcast (Views On News)

Sep 9, 2021

India has a huge advantage in using climate friendly EV batteries.

4 Ways to Play the EV Opportunity (Views On News)

Sep 6, 2021

The EV disruption is happening faster than you think. Here's how you can ride the Indian EV megatrend.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ASHOK LEYLAND SHARE PRICE


Dec 3, 2021 (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

COMPARE ASHOK LEYLAND WITH

MARKET STATS