Views on Ashok Leyland 3QFY2014 results - Angel Broking

Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Ashok Leyland 3QFY2014 results:

Ashok Leyland results lower than expected

"For 3QFY2014, Ashok Leyland (AL) reported disappointing results as the company reported a loss of Rs. 97cr on the EBITDA front as against expectations of a modest profit of Rs. 21cr. Consequently, the adjusted bottom-line loss stood at Rs. 260cr against our expectations of a loss of Rs. 151cr. The performance for the quarter was impacted due to a volume decline of 18.6% yoy (20% qoq), adverse product-mix (share of MHCV in total volumes down to 16% from 24.9% in 2QFY2014), higher levels of discounts and lower utilization levels. The top-line for the quarter was in-line with our expectations, down 18.8% yoy (23.4% qoq) to Rs. 1,953cr, led by a sharp decline of 27.1% yoy (32.6% qoq) in MHCV volumes. EBITDA margins came in at negative 5% as adverse product-mix, higher discounts and lower utilization levels impacted the operating performance. While, raw-material expenditure as percentage of sales surged 340bp qoq, employee and other expenditure as a percentage of sales surged 230bp and 150bp qoq respectively. During the quarter, the company recorded an exceptional gain of Rs. 100cr and Rs. 34cr towards profit on sale of long term investments and profit on sale of immovable property respectively. The company also recorded an exceptional charge of Rs. 44cr related to VRS compensation, ~500 executives opted for VRS during the quarter.

We believe that the operating environment would continue to remain challenging for the company in the near term as we expect the commercial vehicle cycle to remain weak going ahead. We therefore maintain our Neutral rating on the stock."

Source : Equity Bulls

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