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Ashok Leyland: A mixed 2QFY02 performance

Oct 23, 2001

Ashok Leyland, the second largest manufacturers of commercial vehicles (CVs) in India, has reported a 24.3% rise in net profits for the second quarter ended September 30, 2001. Sales during the quarter has increased by 4.9% to Rs 5,555 m.

(Rs m) 2QFY01 2QFY02 Change
Sales 5,298 5,555 4.9%
Other Income 20 72 265.6%
Expenditure 4,741 5,010 5.7%
Operating Profit (EBDIT) 557 545 -2.2%
Operating Profit Margin (%) 10.5% 9.8%  
Interest 210 192 -8.8%
Depreciation 217 209 -4.1%
Profit before Tax 149 216 45.2%
Tax - 31 -
Profit after Tax/(Loss) 149 185 24.3%
Net profit margin (%) 2.8% 3.3%  
No. of Shares (eoy) (m) 118.9 118.9  
Diluted number of shares 118.9 118.9  
Earnings per share (Rs)* 5.0 6.2  

The company, in its press release, has said that the workmen stopped work for the month of September 2001 in its Hosur unit as a result of which financial results during 2QFY02 was affected. Besides, commercial vehicle demand continues to remain sluggish barring a rise in demand for HCVs in the last two months. As a result, operating margins have witnessed a decline.

However, the value engineering initiatives taken by the company has resulted in lower other expenses thus preventing the margins from a sharp fall. Lower interest and depreciation charges also have translated into higher profit growth for the CV major.

Cost breakupů
(Rs m) 2QFY01 2QFY02 Change
Change in stock (141) 7 -
Raw material costs 3,511 3,601 2.6%
% of sales 66.3% 64.8%  
Staff costs 615 678 10.3%
% of sales 11.6% 12.2%  
Other expenditure 756 724 -4.2%
% of sales 14.3% 13.0%  
Total expenses 4,742 5,011 5.7%

The scrip is currently trading at Rs 62 at a P/E multiple of 9.9x annualised 2QFY02 earnings. The prospects for the rest of the year remains challenging in light of sluggish industrial production. However, given the fact that core sector comprising cement, steel, electricity and mining has shown a 5% growth for September 2001 augurs well for the company. This along with a higher agricultural production is expected boost demand for CVs towards the end of the year. Also, the Golden Quadrilateral project is also progressing at a faster clip, which could help boost sagging volumes in the long run.

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