The Chennai-based bus and truck maker's net sales are seen down 21 percent year-on-year to Rs 2,371 crore, while operating margin may fall to 4.3 percent from 8 percent.
India's second largest commercial vehicle maker Ashok Leyland will report its first quarter results on Tuesday, amid what has been a continued bumpy ride for truck makers.
Sales, especially that of medium and heavy trucks, have been hit hard for more than a year now as truck operators and logistics companies postponed fleet expansions amid the overall slowdown in the economy. In the last few months, even the small trucks like Ashok Leyland Dost have seen few buyers.
Even as demand for trucks is down, competition has increased over the last few years, and new players, in particular Bharat Benz, have become very aggressive.
Companies like Tata Motors and Ashok Leyland increased advertising and promotional spends over the last one year to stay ahead of the new players. CV makers are also offering huge discounts to sell trucks in the market and all that is also hurting margins.
Ashok Leyland is expected to report a first quarter net loss of Rs 60 crore, compared with a net profit of Rs 67 crore in the year ago quarter, according to a CNBC-TV18 poll. Analysts expect the Chennai-based company's revenue to decline 21 percent year-on-year to Rs 2,371 crore.
Its EBITDA is expected to slump 57 percent to Rs 103 crore, while operating margin is likely to fall to 4.3 percent from 8 percent, a year ago.
Emkay Global Financial Services says, Ashok Leyland's performance will remain poor due to a decline in M&HCV volumes. Higher discounts and poor operating leverage will hurt margins and higher interest and depreciation should lead to a loss, it says.
The company's sales in April-June tumbled 26 percent year-on-year 18,991 units. While M&HCV sales slumped 26 percent to 14,897 units, LCV sales fell 5 percent to 6,824 units.
Apart from pressure on margin, the company's average realisations are also expected to decline more than 4 percent year-on-year due to increasing share of LCVs (account for more than 30 percent of total volumes) in the product mix and higher discounts on medium and heavy trucks.
KEY THINGS TO WATCH
- Demand outlook for LCVs and M&HCVs
Ashok Leyland shares hit a 52-week low of Rs 17.30 on NSE on Monday. The stock closed down more than 2 percent at Rs 17.45. Since March-end, the stock has declined 20 percent, compared with the wider CNX-Auto Index, which has gained near 7 percent.
READ MORE ON Ashok Leyland, results, earnings, Q1, first quarter, April-June, commercial vehicles, M&HCV, LCV, medium and heavy trucks, Dost, margin, outlook, poll, Tata Motors
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