Jan 25, 2013 01:59 PM IST | Source:

Ashok Leyland slips on poor Q3 results

Ashok Leyland shares tripped over 4 percent on Friday morning after it reported third quarter results much below street expectations.

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Moneycontrol Bureau

Ashok Leyland shares tripped over 4 percent on Friday morning after it reported third quarter results much below street expectations.

The India's second largest commercial vehicle maker said late Thursday that net profit for Oct-Dec quarter rose 11 percent year-on-year to Rs 74 crore, helped by Rs 156 crore profit on disposal of non-current investments.

Excluding the one-time gain, it had a loss of Rs 84 crore (including other income and finance costs), compared with a profit of Rs 71 crore in the year ago quarter.

Demand for medium and heavy commercial vehicles in India has been extremely sluggish over last several quarters on the back of high interest rates and the overall slowdown in the economy, which has made goods carriers postpone fleet expansions. This has dented sales of companies like Tata Motors and Ashok Leyland, top two players in the field.

The Hinduja Group company's revenue last quarter was down 18 percent to Rs 2,381 crore.

"Against the backdrop of a sluggish economy and weak macro-economic indicators, Q3 was bound to be an extremely challenging one for a GDP-driven industry as ours," Vinod Dasari, MD, said.

Dasari further said that the Sri Lankan market had also underperformed. But that was almost offset by its inroads in non-SAARC (South Asian Association for Regional Conference) markets.

The company sold 22,661 units in the third quarter, down from 23,175 units it sold in the year ago quarter. While M&HCV sales are slow, its small CV Dost (18 percent market share) is seeing brisk sales in the 9 states its currently present in. Ashok Leyland said it is also growing in the LCV segment on the back of better acceptance of the Ecomet range of vehicles and initial feedback to the recently launched multi-axle vehicles with twin-speed rear axles has also been encouraging.

Nomura Financial Advisory and Securities India said that Ashok Leyland's adjusted net loss was "disappointing" and below its expectation of Rs 6.1 crore profit and consensus estimate of Rs 13.7 crore profit.

Further more, margins too came in at a much lower 4.3 percent, compared with expectation of 8 percent, due to higher-than-expected staff cost (Rs 262 crore) and other expenditure (Rs 306 crore), Nomura analysts Kapil Singh and Nishit Jalan said.

"The lower margin was a disappointment. Further, the sharp industry slowdown and increased competition remain a concern," the analysts said maintaining a "neutral" rating on the stock, with a target price of Rs 27.

At 9:45 hrs, Ashok Leyland shares were down 1.6 percent at Rs 24 on NSE.

Nachiket Kelkar

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