Ashok Leyland net profit skids 17% in Q4, but brokerages retain the 'buy' tag

Total revenue from operations increased nearly 33 percent YoY to Rs 11,626 crore

The Ashok Leyland share price will be in focus with likely reaction from its March quarter numbers declared on May 23.

Commercial vehicles maker Ashok Leyland reported nearly 17 percent drop in standalone net profit at Rs 751 crore for the quarter ended March 31, 2023. The automaker had reported a profit of Rs 901 crore in the year-ago period.

Total revenue from operations increased nearly 33 percent on-year to Rs 11,626 crore as against Rs 8,744 crore in the same quarter last fiscal. Revenue for full year was at Rs 36,144 crore, up from Rs 21,688 crore in Q4FY22.

Ashok Leyland's fourth-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) increased to 11 percent from 8.9 percent last year, while operating margins expanded 209 basis points to 10.97 percent.

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Here is what brokerages have to say about stock and the company post March quarter earnings:

Nomura

The research house has kept the 'buy' rating on the stock with a target price of Rs 184 per share.

The Q4FY23 EBITDA margin beat the consensus. The operating leverage and higher gross margins boosted the EBITDA margin.

The company's revenue was largely in line with estimates and the average realization per vehicle was up.

However, the tax rate of 33 percent was higher than Nomura's estimate of 25 percent, while adjusted profit after tax (PAT) was below the estimate but ahead of the consensus.

Nomura believes that the commercial vehicle (CV) cycle will remain positive due to the demand framework, and they expect Ashok Leyland to outperform the industry. Also, expect further improvement in net realizations, as the competitive intensity in the market is expected to remain benign.

Motilal Oswal

Volumes grew 22.5 percent YoY to 59,700 units, led by growth in MHCV volumes and market share gains. Realizations grew 8.5 percent YoY (up 3 percent QoQ) to Rs 1.95 million (as against estimates of Rs 1.99 million), supported by price increases. Net revenues grew 33 percent YoY to Rs 116.3 billion (in line).

Gross margins improved 270bp YoY (down 70bp QoQ) to 24.4 percent.

However, higher-than-estimated staff costs were offset by lower other expenses, supporting EBITDA margin expansion to 11 percent as against an estimate of 10.2 percent. EBITDA improved 64 percent YoY or 60 percent QoQ to Rs 12.8 billion as against an estimate of Rs 12.1 billion.

The stock trades at 9x EV/EBITDA and 3.6x P/BV on a FY25 basis. The brokerage house maintained the 'maintain' rating.

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