Views on Ashok Leyland 4QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Auto & Auto Ancillary, Angel Broking) on Ashok Leyland 4QFY2014 results:

Ashok Leyland (AL) reported better-than-expected results for 4QFY2014 as the operating performance of the company witnessed a turnaround led by superior product-mix and cost control initiatives undertaken over the last one year. The company turned profitable at the operating level registering an EBITDA margin of 6%, significantly ahead of our expectations of 0.6%. The beat on the operating front was driven largely by a sharp fall in the other expenditure, possibly on account of cost control measures and also due to lower advertising expenditure. Top-line for the quarter declined 17.5% yoy to Rs. 3,077cr as volumes witnessed a steep decline of 24.9% yoy. However, top-line performance was ahead of our expectations of Rs. 2,739cr led by a strong 9.7% yoy (11.6% qoq) growth in net average realization. We attribute this growth to superior product-mix - higher share of exports and higher share of MHCV's in the volume-mix. The company however continued to bleed on the bottom-line front as adjusted net loss stood at Rs.13cr; nevertheless it was significantly better than our expectations of a loss of Rs. 155cr. Sharp decline in the top-line coupled with increase in interest cost led to the bottom-line loss. During the quarter, the company recorded an exceptional gain of Rs. 376cr attributable to profit on sale of long term investments and profit on sale of immovable property respectively. As a result, reported net profit stood at Rs. 363cr.

The company for the first time presented its consolidated results. The consolidated top-line stood at Rs.11,487cr with operating margins at 3.7% and an adjusted bottom-line loss of Rs. 685cr.

We believe that the domestic commercial vehicle industry is at the cusp of a revival and expect the demand environment to improve in 2HFY2015 which would be the key trigger of volume growth for the company. We shall release a detailed result note post earnings conference call with the management which is scheduled tomorrow. Until then, our rating and target price is under review.

Ashok Leyland (CMP: Rs. 29/ TP: Under review/ Upside: -)

Source : Equity Bulls

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