LKP Research's research report on Ashok Leyland
Ashok Leyland (AL) reported solid topline growth of 9% qoq while posting a growth of 63% yoy on a low base. The base quarter last year was low on chip shortage issue. Volumes during the quarter slightly moved down by 3% qoq, while grew by 29% yoy. Realizations grew handsomely by 27% yoy and 13% qoq which contributed strongly to the qoq topline growth. This growth came on the back of robust product mix and price hikes taken during the quarter. The company gained significant market share yoy at 32.6% from 25.3% and 30 bps from 32.3% qoq. EBITDA margins expanded to 8.8% up by 230 bps sequentially and 480 bps yoy. This was due to decreased commodity costs (76.3% of sales v/s 78% qoq and 77.9% yoy) and lower other expenses (8.8% v/s 9.1% of sales qoq) led by lower marketing costs and reduction in discounts. Other income was up qoq at ₹316 mn, while tax rate was at 36.7% as the company is still going with the old tax regime. PAT adjusted for one time gain of ₹69.4 mn came in at ₹3.54 bn up from ₹1.91 bn qoq.
Outlook
Divestment in Switch Mobility to act an additional trigger as and when it happens. We maintain BUY with a target of ₹186.
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