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Research
Ashok Leyland - 1QFY2018 Result Update - Angel Broking
Posted On : 2017-07-26 20:54:34( TIMEZONE : IST )
Results below estimates: ALL reported 0.5% decline in the top line to Rs. 4,238cr while 62% yoy decline in the adj. PAT to Rs. 111cr. Though sales beat the cons. estimates, bottom line missed the estimates by 27% due to the higher RM costs and overheads. This was a one-off quarter due to GST and BSIV led disruption. The results are not comparable due to merger of foundry business with itself.
Realizations increase due to price hike: While the sales were weak during the quarter (volumes declined by 8.6% yoy), per unit realization was higher by 8.8% yoy as company has taken the price hike due to the transition to the BSIV fuel norms. The MHCV volumes during the quarter were down by 17% while LCV volumes were up 21% yoy.
Margins decline due to higher RM costs: Owing to the 10% growth in the RM costs/unit, gross margins declined by 80bps. EBITDA declined by 36.5% yoy to Rs. 306cr, while margins declined sharply to 7.2% vs. 11.3% in 1QFY17 and 11.0% in 4QFY17. Company reported PAT at Rs. 126cr, adjusted for exceptional items (impairment of loss in a subsidiary and exchange loss), PAT is at Rs. 111cr. The result clearly shows that slower sales growth and higher input /operating prices have impacted the numbers in the quarter.
Positive guidance by management: The management has guided of strong demand in the remainder of the year owing to the new technology iEGR. It also expects to launch new LCV every quarter. Company took 7-10% hike in April-17 owing to the BSIV transition and has taken another hike in 1QFY18 to offset higher input prices. Company has indicated of Rs. 500cr capex in FY18.
Valuation and outlook: We expect company to report CAGR of 11%/17% in the volumes/revenue over next two years. We maintain our Buy on the stock with a price target of Rs. 124 - 20x of FY2019E EPS Rs. 6.2 (10.8x FY2019E EV/EBITDA multiple).
Shares of ASHOK LEYLAND LTD. was last trading in BSE at Rs.106.15 as compared to the previous close of Rs. 104.9. The total number of shares traded during the day was 726975 in over 2827 trades.
The stock hit an intraday high of Rs. 106.5 and intraday low of 105. The net turnover during the day was Rs. 76907474.
