Ashok Leyland Limited (ALL) reported a weak set of numbers in Q2FY19 on all fronts, namely revenue, EBITDA, and PAT. ALL's standalone revenue in the quarter stood at Rs7,608cr, up 25% yoy (22% qoq), missing the expectations of Rs7,879cr. The growth in revenue was almost entirely led by the growth in volume, which stood at 27% yoy (23% qoq). Realization was 1% lower on a yoy and qoq basis due to severe discounting prevailing in the CV sector.
The company was able to keep operating, manufacturing, and employee expenses under check, which offset high raw material costs. Consequently, EBITDA margin expanded 52bps yoy (23bps qoq) to 10.6%. At Rs806cr, standalone EBITDA was 32% yoy higher (24% qoq higher), but it still missed the expectations of Rs891cr. Lower depreciation, interest expenses, and tax rate helped propel PAT (before EO and forex expenses) growth to 41% yoy (22% qoq) at Rs476cr. The company reported an extraordinary loss of Rs16cr on the sale of immovable properties. Considering these extraordinary items, reported PAT in the quarter was Rs460cr, up 37.5% yoy (24% qoq).
In a significant announcement, ALL MD-CEO Vinod Dasari resigned w.e.f. March 31, 2019. ALL Chairman Dheeraj Hinduja will step in as Executive Chairman (EC) with immediate effect.
The press release mentioned that Dasari resigned due to personal reasons and not elaborate further. Dasari's sudden exit will raise some concerns among investors, given that he steered ALL to growth during his 14-year-long stint there.
Conference Call Highlights
Management maintained its long term targets for the company, namely, to be among Top-10 global cargo M&HCV makers and Top-5 global passenger M&HCVs, to become the market leader in India, raise proportion of overseas business to 1/3rd of total revenues and increase share of non-cyclical businesses.
The management sounded cautious regarding prevailing liquidity issues in the system. ALL’s group entity, Hinduja Leyland Finance contributes 10% of its total sales and remaining is financed by NBFCs and banks. No other entity contributes more than 15% to the total financing pie.
Volume growth could be muted in H2FY19, but will pick up in FY20, due to pre-buying before BS-VI implementation.
Ashok Leyland Ltd ended at Rs119.05, up 0.95 points, or 0.8%, from its previous close of Rs118.10 on the BSE. The scrip opened at Rs118.90 and touched a high and low of Rs119.35 and Rs117.15, respectively. A total of 1,64,72,154 (NSE+BSE) shares were traded on the counter. The stock traded above its 200-DMA.
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