Ashok Leyland turns a profit in Q3 but misses market estimates

Hinduja Group-owned commercial vehicle maker Ashok Leyland turned a profit in the third quarter, led by higher commercial vehicle volumes even though the vehicle financing vertical faced a slowdown.

The company reported a standalone net profit of Rs 5.76 crore for the three months ended December 2021, compared with a loss of Rs 19.38 crore in the corresponding quarter last year. 

Analysts expected the company to report a profit of Rs 8-10 crore.

Sequentially, profit showed a stark improvement after the company had reported a loss of Rs 83.01 crore in the quarter ended September 2021.

However, on a consolidated basis, the company reported a loss of Rs 121.56 crore for the December 2021 quarter against a profit of Rs 14.24 crore in December 2020. Sequentially, too, third quarter losses widened from Rs 103.43 crore in September 2020.

The company’s standalone revenue from operations grew 14.9% year-on-year to Rs 5,503.64 crore for the December 2021 quarter. Revenue surged 24.3% quarter-on-quarter from Rs 4,426.19 crore.

Consolidated revenue grew 11.8% from a year earlier to Rs 6,627.35 crore from Rs 5,928.15 crore in October-December 2020, and 19.4% from Rs 5,530.18 crore in July-September 2021.

Shares of Ashok Leyland fell 2.46% on the BSE on Friday to close Rs 132.95 apiece amid a market wide sell-off that saw BSE’s benchmark Sensex lose 1.3%.

Ashok Leyland’s stock has touched a high of Rs 153.40 and low of Rs 106.20 in the past 52 weeks. The company released its quarterly earnings after market hours on Friday.

Other Key Highlights

1) EBITDA remained flat at Rs 758.48 crore as against Rs 752.93 crore in December 2020, as high commodity prices impacted margins.

2) Domestic medium-to-heavy commercial vehicle volume stood at 16,667 units, up 15% from 14,468 units last year.

3) Light commercial vehicle (LCV) volume declined to 14,233 units from 15,991 units, constrained by semiconductor shortages.

4) Cost of raw materials rose 15.4% while cost related to purchase of finished goods increased 11.2%.

5) The company generated cash of Rs 415 crore, which helped bring down net debt to Rs 2,697 crore. Debt-to-equity stood at 0.42 times.

Management Commentary

Ashok Leyland executive chairman Dheeraj Hinduja said the commercial vehicle industry is on a road to recovery owing to the improvement in the macroeconomic environment and healthy demand from the end-user industries. 

Switch Mobility, the electric vehicle arm, has made noticeable progress, and holds positive long-term prospects for the future towards the use of alternate fuels.

“The MHCV segment is expected to lead the recovery in the coming months riding on the back of growth in core sectors such as construction and mining, increased capital outlay for infrastructure projects, conducive financing environment and pent-up replacement demand,” Hinduja said.

“Together with the introduction of CNG, we are confident of recovering our market share. LCV volumes should grow further owing to the increased demand for last mile connectivity, especially from the e-commerce segment. 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,” he added.

Also read: Apollo Hospitals Q3 net profit, revenue grow at rapid pace