Ashok Leyland Ltd (updated - 06 May 2010)
The stock of Ashok Leyland has been on a roll, appreciating nearly 5 per cent, after the company posted impressive results for March 2010 quarter on April 29. Even yesterday, when markets were down, the stock was up another 3 per cent, helped by strong vehicle sales numbers for April.
After almost 18 months of slowdown in commercial vehicle (CV) sales, the second half of 2009-10 saw healthy improvement with the company registering 123 per cent year-on-year volume growth during the period. This helped Ashok Leyland clock 139 per cent year-onyear rise in net sales to Rs 2,941 crore, with margins improving on higher utilisation levels. Net profit jumped fourfold to Rs 223 crore.
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The improved business environment has also reflected in the sales figures for April 2010, wherein the company registered an increase of 271 per cent yearon-year at 6,500 vehicles led by strong medium and heavy commercial vehicle (M&HCV) sales.
Notably, the management has a positive outlook for the domestic CV segment and expects the industry to clock 15-18 per cent growth in volumes in 2010-11. “Majority of the factors that drive freight demand and consequently M&HCV demand have turned positive,” analysts suggest.
Ashok Leyland has guided for a sustainable operating profit margin of 10 per cent in 2010-11, primarily from commensurate top line growth combined with effective inventory management. “The margin guidance could be surpassed given the company’s ability to pass on commodity price inflation as well as the incremental excise benefits from Uttaranchal plant,” states an Edelweiss report. The company has already indicated a further rise in CV prices by around Rs 40,000 due to higher input costs (steel and rubber) and emission norm changes to absorb the cost fully.
It also plans to more than double its capacity of 100,000 vehicles per annum over the next three years, and has earmarked capex of Rs 2,000 crore for FY2010-11, including Rs 800 crore investments in various joint ventures.
The stock has seen a number of upgrades with a buy recommendation and target price of Rs 70-72 post results. At current level of Rs 62.50, it trades at about 16 times 2010-11 analyst EPS estimates.
source - business standard
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Ashok Leyland Ltd (updated - 16 Sept 2010)
As industrial and agriculture sectors post robust growth, trucks have been in demand. At the same time, a clear shift is visible towards higher tonnage vehicles. However, Ashok Leyland has seen a quieter move compared to its peers. Analysts expect this to improve, given the robust demand for commercial vehicles (CVs) moving in tandem with strong agricultural and industrial growth. A 10-year analysis puts the multiplier effect for CVs at about 1.4x Index of Industrial Production, according to a Sharekhan research.
In a recent analysts’ meet, the management stood by its earlier guidance of total sales of 90,000 vehicles in FY11, adding that it was rather a conservative estimate, given adistinct possibility of additional sales of 6,000 units.
The company’s market share increased to 27 per cent in the June quarter compared to 17 per cent a year ago, boosted by resurgence in multi-axle vehicle sales and high demand in South and West India. It plans to launch the U-Truck Platform by October, with 10 models slated to be introduced within the first month of the launch and around 25 models in the next 18 months.
Going ahead, the company expects to maintain earnings before interest, tax, depreciation and amortisation margins in excess of 10 per cent on the back of the price hike in June. The new emission norms effective October may hurt sales during the quarter. Incremental costs per vehicle are expected to be around `40,000 a vehicle, which the management plans to pass on to consumers. The company is looking at a capex of around `2,000 crore in the next two years, which includes spends on joint ventures.
source - business standard
