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.
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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.
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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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