ASHOK LEYLAND Q3FY24 UPDATE
Ashok Leyland, a leading Indian automotive manufacturer, held a conference call on February 6, 2024, to discuss its financial performance for the first nine months of the current fiscal year (April-December 2023). The company reported strong results, with record-breaking revenue, EBITDA, and PAT.
KEY HIGHLIGHTS:
Revenue: Rs. 27,100 crores, highest ever
Sales Volume: 1,38,416 units, highest ever
EBITDA: Rs. 3,014 crores, highest ever
PAT: Rs. 1,718 crores, highest ever
EBITDA Margin: 12.0% in Q3, moving towards mid-teen target
INDUSTRY OUTLOOK:
Domestic MHCV industry growth: 9% in the first 9 months
Q4 industry growth may be subdued due to high base effect and union elections
Medium-term industry outlook remains favourable due to strong macroeconomic environment, healthy replacement demand, and improving freight demand
COMPANY STRATEGY:
Focus on profitable growth, not sacrificing margins for market share
Continuous cost reduction efforts
Strict pricing discipline
Expansion of sales network and service reach
Investment in electric vehicles through Switch Mobility
ELECTRIC VEHICLE BUSINESS(SWITCH MOBILITY):
Strong performance of Switch products in the market
First batch of electric LCVs to be delivered within the next few months
Commercial launch of electric truck and nearing market trials of electric tractor trailer
Investment of Rs. 662 crores in Optare PLC, the holding company for Switch UK and Switch India
FINANCIAL PERFORMANCE:
Q3 Revenue: Rs. 9,273 crores, up 3% YoY
Q3 EBITDA: Rs. 1,114 crores, up 40% YoY
Q3 PAT: Rs. 580 crores, up 61% YoY
Operating working capital: Rs. 2,004 crores
Net debt: Rs. 1,747 crores
ANALYST’S EXTRAPOLATION OF FUTURE PROFITS:
Based on the company’s strong performance and positive industry outlook, it is reasonable to expect continued growth in the next 2-3 years. The company’s focus on profitable growth, cost reduction, and expansion of its sales network and service reach should drive further revenue and margin improvements.
PROFIT FORECAST:
Based on the company’s strong performance in the first 9 months of the current financial year and the favourable industry outlook, it is reasonable to expect continued growth in the next 2-3 years. The company’s focus on profitable growth, cost reduction, and product differentiation should support margin expansion and revenue growth.
PROFITABILITY FORECAST:
Year 1: 13-15% EBITDA margin
Year 2: 15-17% EBITDA margin
Year 3: 17-19% EBITDA margin
MANAGEMENT GRADE:
The management team of Ashok Leyland has demonstrated strong leadership and execution capabilities. They have successfully navigated the challenges of the pandemic and positioned the company for long-term growth. The management’s focus on profitability, innovation, and customer satisfaction is commendable.
Based on the company’s strong financial performance, strategic initiatives, and focus on long-term growth, overall, I would grade the management team a score of 90 out of 100.