Ashok Leyland up on strong results

Fri, 30 Apr 01:30 pm

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The Indian markets continued to trade above the dotted line in a rangebound manner during the previous two hours of trade. The overall market breadth seems to be positive as there are 1.8 for every loser on the overall BSE. Stocks from across sectors are trading firm led by the consumer durables, auto and realty spaces. Those forming part of the metal and FMCG sectors are amongst the lowest gainers at present.

The BSE-Sensex and the NSE-Nifty are trading firm, higher by about around 80 points and 20 points respectively. While the stocks from BSE-Midcap and the BSE-Smallcap indices are trading firm as well, with the indices higher by 1% and 0.8% respectively. The rupee is trading at 44.39 to the dollar.

Auto stocks are currently trading firm led by Ashok Leyland, Tata Motors, Hero Honda and TVS Motor. The stock of Ashok Leyland is leading the pack of gainers on the back of the company announcing strong 4QFY10 results. The company reported a whopping 141% YoY increase in sales during the quarter. As expenses grew at a slower pace of 132% YoY, the company’s operating profit margins expanded by 3.4% YoY leading to a operating profit growth of 227% YoY. This margin expansion was on the back of a slash in certain costs. At the bottomline level, the company reported a 318% YoY gain. Lower interest costs and a less increase in depreciation aided matters as the profit before tax grew by a strong 735% YoY. However, higher tax outgo brought down the profit growth. As for the full year FY10, revenues and profits increased by 21% YoY and 126% YoY respectively. While this has been a tremendous year for the company, its management does not expect the scenario to remain as rosy going forward. This is on the back of supply constraints and margin pressure (on higher raw material costs), which remain a concern for the auto industry as a whole.

Banking stocks are currently trading firm led by ING Vysya Bank, Kotak Bank and ICICI Bank. A leading business daily has reported that Yes Bank is looking at aggressively expanding its branch network over the next few years. At present, the bank has about 150 branches. It plans to increase this to about 750 in a period of five years. In addition, the bank’s management also is planning to go strong on the recruitment side. Currently the bank employs around 3,030 people. By the end of FY11, it plans to take this up to 4,500. Over the next five years, the target is to take up its employee base to about 12,000, nearly four times the current level. All these strategies are in line with the bank’s plan of growing fast by tapping the retail banking segment. This would indirectly help it increase the proportion of low cost deposits (CASA) over time. The bank has set a target of achieving 25% CASA by FY12 and 40% by FY15. The same may however be impacted by competition from the PSU and private sector players.