Revenues at Rs24.8bn higher by 4.8% yoy were better than our estimates
Volumes lower by 9.9% yoy, but blended realizations rose by 16.3% yoy; Sequentially volumes were lower by 24.8% while realizations rose 7.1%
While M&HCV volumes were lower by 2.2% yoy, LCV volumes plummeted 26.5% yoy
OPM at 4.7% was higher by 370bps yoy but fell 129bps qoq, while gross margins were higher both sequentially and yoy, staff costs and overheads were also lower on yoy basis
Performance at PAT level was better than expected as the company reported a loss of Rs480mn v/s our expectation of a loss of Rs1,072mn
Assign Accumulate rating while we retain our 9-month price target of Rs34
|(Rs m)||Q1 FY15||Q1 FY14||% yoy||Q4 FY14||% qoq|
|OPM (%)||4.7||1.0||370 bps||6.0||(129) bps|
|Effective tax rate (%)||31.9||15.7||22.3|
|Adj. PAT margin (%)||(1.9)||(5.7)||379 bps||(0.4)||(152) bps|
|Extra ordinary items||-||(65)||-||3,761||-|
|Ann. EPS (Rs)||(0.7)||(2.0)||-||(0.2)||-|
Revenues better than expectations
Beating our estimates, Ashok Leyland (ALL) reported a revenue of Rs24.5bn an increase of 4.8% yoy in Q1 FY15. This was better than our expectations by 6.1% owing to much higher than anticipated increase in realizations. A sharp total volume decline of 9.9% yoy was offset by decline in discounting levels. While M&HCV volumes were lower by 2.2% yoy, LCV volumes plummeted 26.5% yoy. Management indicated that discounts per vehicle in M&HCV category have slipped to around Rs160,000 from Rs180,000 a couple of quarters ago.
Operating performance was better than expectations
EBITDA was much better than expected as the OPM was at 4.7% as compared to our estimate of 3.5%. OPM was higher by 370bps yoy but was down 129bps qoq. Gross margins were higher on a yoy basis by 217bps as commodity prices have eased and realizations have seen sharp improvement on the back of better product mix and lower discounts. While staff costs as a percentage of sales were higher by 50bps yoy owing to operating deleverage the company was able to rein in other overheads by 203bps yoy as a percentage of sales. On a sequential basis, while staff costs were higher by 339bps as a percentage of sales owing to operating deleverage company was able to rein in overheads by 10bps as a percentage of sales.
Loss much lower than expected
Interest costs also moved lower on a qoq basis, on the back of recent decrease in debt as the company raised money via QIP. Working capital on the other hand increased as company built in inventories for JNNRUM and few export orders. Company reported a loss at the PAT level of Rs480mn as compared to our estimate of Rs1,072mn loss. Better performance was on the back of superior operational performance and lower interest expenses.
|As a % of net sales||Q1 FY15||Q1 FY14||bps yoy||Q4 FY14||bps qoq|
Assign Accumulate rating on back of volume upsides
Over the past three months stock price of Ashok Leyland has more than doubled. The key reason has been the turnaround in the sentiment for commercial vehicle demand. With stable government at the centre and empirical track record of pro infra stance of the NDA government, street is building in a strong recovery in FY16 and FY17. While we corroborate the view but we feel the stock is factoring in the upsides adequately. We retain our price target of Rs34 and assign an Accumulate rating.
|Y/e 31 Mar (Rs m)||FY13||FY14||FY15E||FY16E|
|yoy growth (%)||(3.3)||(20.3)||18.5||30.0|
|yoy growth (%)||(23.4)||(93.2)||80.1||810.3|