Ashok Leyland - 4QFY2012 Result Update - Angel Broking

Ashok Leyland (AL) reported an in-line results for 4QFY2012 led by a strong volume growth of 20.2% yoy (53.7% qoq) aided by increasing contribution from the recently launched light commercial vehicle (LCV) Dost, ~14% of total volumes in 4QFY2012. Due to attractive valuations we maintain our Buy rating on the stock.

In-line results for 4QFY2012: For 4QFY2012, AL reported an in-line revenue growth of 12% yoy (48.5% qoq) drive by a strong 20.2% yoy growth in volumes, which was partially offset by 6.8% yoy (3.4% qoq) decline in net average realization. While volume growth was supported by the incremental volumes from Dost; net average realization declined led by adverse product-mix (higher contribution from lower priced Dost) and higher level of discounts. EBIDTA margins came in at 10.9% (down 230bp yoy and up 366bp qoq) impacted on account of weaker product mix and high other expenditure. Other expenditure increased primarily on account of increase in advertising and brand building expenses (Rs.6cr) and higher R&D spends (Rs.10cr) during the quarter. Further, AL also incurred a MTM loss of Rs.15cr on forex liabilities. As a result, operating profit declined by 7.5% yoy to Rs.470cr. Net profit, however, declined by 13.2% yoy to Rs.259cr led by higher interest (up 32% yoy on higher working capital requirements) and depreciation expense (up 24% yoy).

Outlook and valuation: At Rs.26, AL is trading at attractive valuations of 8.8x its FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.33, valuing the stock at 11x its FY2014E earnings.

Source : Equity Bulls

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