The benchmark Nifty 50 index fell up to 3% on Monday as geopolitical tensions intensified. Against this backdrop, Ashok Leyland Ltd’s December quarter (Q3FY22) results could not shield the stock, which fell nearly 7% on the NSE.
As such, Ashok Leyland’s results were not very exciting. Rising commodity costs meant that gross profit per vehicle fell approximately 5% sequentially and 3% year-over-year (y-o-y) in Q3. Earnings before interest, taxes, depreciation and amortization (Ebitda) declined 12% 224 crores.
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Still, there were some bright spots in the results. The third quarter growth in domestic sales of medium and heavy commercial vehicles (MHCVs) was strong at 39%. In comparison, the industry’s overall volume growth stood at 20%. As a result, Ashok Leyland’s MHCV market share increased from 22.5% in Q2 to 26.1% in Q3 and further to 28.8% in January, the management said.
In Q3, revenue grew 15% annually 5,535 crore on the back of 2% growth in sales volume and 13% growth in net realization per vehicle. The management said that the transition from Bharat Stage IV (BS4) to BS6 involves high technology. In addition, higher commodity costs and other constraints led to an increase in product value.
“The company is more efficiently sustaining price hikes, which will result in better margins,” said an analyst on the condition of anonymity. Thus, the management expects better margins in Q4FY22 on account of possible fall in commodity prices and easing of semiconductors. chip shortage problem
Meanwhile, Ashok Leyland’s EV arm, Switch UK, continues to grow. “It is planning to launch CNG vehicles in Q4FY22, which will fill the gap in the fast growing CNG ICV segment,” analysts at Motilal Oswal Financial Services said in a report. ICV is an intermediate commercial vehicle.
The stock fell 3% in the past one year compared to a gain of 2% in Nifty Auto. “The major triggers for the stock include revival in demand and achieving 30% market share. Any downside on that front could be a major risk,” said the analyst cited above. Management expects to gain 30% market share in the coming months as the economy opens up. Healthy trucks with strong growth in e- There will be demand for commerce, stalled replacement demand and increased capital outlay in the recently announced budget.
To be sure, railways could emerge as a tough competitor for freight transport as it expands capacity and becomes more efficient.
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