After Q2 results, what are the triggers for the Ashok Leyland stock?

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Ashok Leyland Ltd’s shares hit a new 52-week high on the National Stock Exchange (NSE) on November 16 but gave up the gains quickly, declining by over 3 percent. The Chennai-based truck and bus manufacturer’s September quarter results weren't bad, but they weren’t particularly striking either.

For investors, one chief concern is that the market share of Ashok Leyland’s medium and heavy commercial vehicle (MHCV) segment is under pressure owing to a slowdown in demand in south India and a lack of compressed natural gas (CNG) models. What augurs well is that Ashok Leyland will be launching CNG products starting in the March 2022 quarter to recoup lost market share.

“We expect Ashok Leyland to regain its lost share once the bus segment (about 45 percent share) and southern market recovers plus company launches new CNG models,” analysts from Prabhudas Lilladher Pvt Ltd wrote in a report on November 15.

The report added: “Improvement in fleet utilization levels led by higher infra spending, construction and mining, improved financing availability and pickup in replacement demand will keep MHCV demand upbeat.”

“The company will have to regain its lost market share in the M&HCV segment, which needs to be closely monitored,” wrote Kotak Institutional Equities analysts,

On a sequential basis, Ashok Leyland swung to a profit of Rs 134.7 crore at the earnings before interest, tax, depreciation and amortisation (EBITDA) level in the September quarter from a loss of Rs 140 crore in the preceding trimester. EBITDA is a key measure of a company's profitability.

Also read: Global brokerages retain 'buy' on Ashok Leyland on hopes of demand revival

Year-on-year, EBITDA grew 67.5 percent. This was despite input costs being painfully higher. Raw material costs as a percentage of revenue rose as much as 547 basis points (bps) year-on-year and 257 bps quarter-on-quarter. One basis point is one-hundredth of a percentage point. Overall, Ashok Leyland's EBITDA margin increased 19 bps to 3 percent.

Be that as it may, not everyone is impressed with Ashok Leyland’s second-quarter results. For instance, reported EBITDA was 28 percent lower than Kotak’s estimates because of lower-than-expected gross margins and lower net realization. Ashok Leyland’s gross margins contracted year-on-year as well as sequentially owing to cost pressures. Net realisation increased by 11 percent year-on-year. A poor mix and higher discounts led to a decline of 1.3 percent in average selling prices vis-à-vis the June quarter.

Some analysts have cut their earnings estimates. “Factoring in the EBITDA loss in H1 and a 6 percent reduction in volume estimate, we lower FY22E EBITDA by 30 percent (margin reduction of 230 bps),” wrote analysts from Emkay Global Financial Services Ltd in a report on November 15. The securities firm has reduced its FY23/24 EBITDA estimates by 2 percent each citing cost pressure.

Also read: Ashok Leyland in talks with investors to raise funds for EV subsidiary Switch Mobility

Ashok Leyland stock is trading at around Rs 148. As such, the stock’s significant 70 percent appreciation from its pre-COVID highs in January 2020 suggests that investors are capturing a good share of the optimism ahead. This may well cap a sharp upside in the stock in the near future.