Ashok Leyland Ltd’s efforts to regain home market share within the medium and heavy industrial automobile (M&HCV) section have borne fruit. The automaker captured 30.6% of the market within the March quarter (Q4FY22), a multi-quarter excessive, driving on the introduction of compressed pure fuel (CNG) autos and an enlargement within the distribution community. This compares effectively with the market share of 28.9% in Q4FY21.
Ashok Leyland’s M&HCV volumes in This autumn rose about 50% greater than business progress, the administration mentioned in a submit earnings name.
The corporate, which had a market share of 30% in April, plans to launch 4 extra CNG autos in the course of the 12 months throughout completely different tonnage classes. Generally, CNG constitutes 40% of the intermediate industrial automobile (CV) section at current.
It stays to be seen if the corporate can maintain this place within the highly-competitive market. If it does, this might rub off positively on the inventory.
Analysts reckon margin enlargement to be a key driver. In This autumn, Ebitda (earnings earlier than curiosity, taxes, depreciation and amortization) margin at 8.9% rose by 1.24 proportion factors year-on-year (y-o-y), beating analysts’ estimates by a mile. Higher working leverage amid a excessive inflationary atmosphere led this enlargement.
Nonetheless, elevated commodity prices are a degree of fear. Even so, the softening in metal costs bode effectively for margins. The corporate hopes to realize double-digit Ebitda margin. It has taken worth hikes in This autumn and in April, too. The administration mentioned on a worth hike of two%, they’re retaining 1.6-1.7% web after reductions, which is nice, however the low cost is barely excessive.
The CV section is about to profit from a robust cyclical upturn after the final downcycle. Business volumes fell y-o-y in FY20 and FY21, submit which FY22 has seen a restoration. “Business volumes grew 49% y-o-y in FY22 and we consider vans are on the early stage of a protracted upcycle, which have lasted 4 years on common prior to now. We issue truck volumes rising 34%/15% y-o-y in FY23/FY24. Our FY24 quantity is much like the FY19 peak,” mentioned analysts at Jefferies India in a report on 20 Might.
Elevated infrastructure exercise by the federal government, sturdy progress in e-commerce, and impending substitute demand augurs effectively for the section. The administration sees headroom for progress as the typical age of vans at 9.9 years is sort of at an all-time excessive. Additional, reopening of schools and places of work means extra alternatives for the bus section.
Elevated gasoline costs had been anticipated to have a bearing on the demand however the section has emerged largely unscathed. “Demand tailwinds evident from a rise in freight utilization have outweighed gasoline issues. With the reduce in excise responsibility on gasoline costs, the deal has develop into sweeter for fleet operators,” mentioned Varun Baxi, analyst at Nirmal Bang Equities.
The corporate additionally sees elevated traction in export markets resembling Africa and the Center East. Complete exports in FY22 grew by 38% y-o-y. Whereas demand is robust, the semiconductor scarcity continues to weigh on the sunshine CV section.
Traders will watch if the corporate’s market share trajectory continues. Ashok Leyland’s shares closed up 6% on Friday on NSE following the This autumn outcomes. “Valuations at 19.8 instances FY24E worth to earnings and 10.9x EV/Ebitda are reflecting within the early restoration cycle. Any fundraise in Change Mobility can function a re-rating catalyst,” mentioned analysts at Motilal Oswal Monetary Providers in a report on 21 Might. EV is enterprise worth. Change Mobility is the corporate’s electrical automobile enterprise.
Supply: Live Mint