Ashok Leyland beats streets estimates with four-fold jump in Q4 net profit

Commercial vehicle maker Ashok Leyland surprised the market with significantly higher earnings, partly boosted by exceptional income, but also recorded high revenue growth that came ahead of analysts’ estimates for the three months ended March 31, 2022.

Ashok Leyland’s standalone net profit shot up almost four-fold to Rs 901 crore against Rs 241 crore in the quarter ended March 31, 2021. This comprehensively beat analysts’ projections that pegged the profit of the company at around Rs 250-260 crore in the fourth quarter of the last financial year.

This was boosted by Rs 470 crore exceptional income largely attributed to impairment reversal of equity value of subsidiaries.

However, even factoring it out, profit before tax almost doubled to Rs 528 crore.

The company’s revenue rose nearly 25% to Rs 8,744 crore over Rs 7,000 crore in the year-ago period.

Other Key Highlights

1) Truck market share for Q4 improved to 30.6% vis-a-vis 28.9% in Q4 FY21. This is the highest market share in 11 quarters.

2) Operating margin improved to 8.9% as against 7.6% in the same period the previous year.

3) Net margin shot up to 10.3% from 3.45% in the year-ago period.

Management Commentary

Dheeraj Hinduja, Executive Chairman, Ashok Leyland, said, “We have seen recovery in Q4 FY22 and the overall performance has been very good. The CV industry is on a recovery owing to the improvement in the macroeconomic environment and healthy demand from the end-user industries.”

Hinduja also said the medium and heavy commercial vehicle segment is leading the recovery riding on the back of growth in core sectors such as construction and mining, agriculture, increased capital outlay for infrastructure projects and pent-up replacement demand.

“The focus on exports, defence, power solutions and parts businesses will ensure a balanced growth, even as we expand the reach and the products of our core MHCV business. We are keenly following the commodity prices, and the situation on the supply of semi-conductors and hope that both will ease,” he said.

Gopal Mahadevan, Chief Financial Officer at Ashok Leyland, said: “We believe that the Q4 performance posted a good recovery. The higher volumes and our cost management initiatives have helped us improve our bottom line. We have generated close to Rs 2,000 crore in cash this quarter owing to better profits and improved working capital. we will continue to focus on driving operational efficiency.”