Ashok Leyland Q2 earnings grew 56% YoY with expectation of higher volumes and expansion in operating margins in near term

5paisa Research Team 22nd November 2021 - 05:04 pm

In Q2, Ashok Leyland reported a 56% YoY and 50% QoQ jump in net sales at Rs. 44,262mn primarily on account of recovery in volumes and revived economic and industrial activities. In exports, M&HCV volumes grew 63% YoY to 1,526 units, and LCV volumes grew 26% YoY to 701units. In the quarter, M&HCV volumes grew 71% YoY to 13,514 units and LCV volumes, 22% YoY to 14,029 units.

However, the PAT improved from a loss of Rs. 2823 to a loss of Rs. 830, and the PAT margins also saw improvement from -9.6% to -1.9%. The Q2 FY22 gross margin contracted 257bps QoQ due to higher RM prices and high discounts. The EBITDA stood at Rs. 1,347mn, up 67.5% YoY but down 196.1% QoQ.

With strong economic recovery, in near future it is believed that a strong replacement demand would pick up in tillers and tippers in H2 FY22 and with shift from BS3-BS4 to BS6 technology and an expansion in operating-leverage-led margin supported by expected volume growth and effective cost-cutting efforts. Hence, 5% margin is expected in FY22, and 10% in FY23 An estimated growth in sales stands at 49%, in FY22, and 27% in FY23 and revenue growth of 19% YoY, and the margin to be11%; hence, we expect earnings to grow 44% YoY to Rs18bn and a revenue CAGR of 31% over FY21-24.