Revenues at Rs30.8bn lower by 17.5% yoy; higher than our estimates
Volumes lower by 24.8% yoy, but blended realizations rose by 9.7% yoy; Sequentially volumes were higher by 41.2% and realizations rose 11.6% yoy
While M&HCV volumes were lower by 20.2% yoy, LCV volumes plumetted 34.5% yoy
OPM at 6% was higher by 66bps yoy and 11ppts qoq on back of benefits of operating leverage, cut in employee count, decline in discount levels and reduced overheads
Reported PAT at Rs3.6bn was buoyed by extraordinary income of Rs3.7bn, sans which the company would have reported a loss of Rs127mn as against our expectations of Rs1.5bn loss
Upgrade to Market Performer with a revised 9-month price target of Rs34
|(Rs m)||Q4 FY14||Q4 FY13||% yoy||Q3 FY14||% qoq|
|OPM (%)||6.0||5.3||66 bps||(5.0)||1094 bps|
|Effective tax rate (%)||22.3||42.1||9.0||1331 bps|
|Adj. PAT margin (%)||(0.4)||0.4||(83) bps||(13.3)||1287 bps|
|Extra ordinary items||3,761||1,344||179.9||923||307.4|
|Ann. EPS (Rs)||(0.2)||0.2||(181.0)||(3.9)||(95.1)|
Revenues better than expectations
Beating our estimates, Ashok Leyland (ALL) reported a revenue of Rs30.8bn a slide of 17.5% yoy in Q4 FY14. This was better than our expectations by 9.4% owing to much higher than anticipated increase in realizations. A sharp total volume decline of 24.8% yoy was offset by decline in discounting levels. Management indicated that discounts per vehicle in M&HCV category have slipped to around Rs160,000 from Rs180,000 a quarter ago.
Operating performance was better than expectations
EBITDA was much better than expected as the OPM was at 6% as compared to our estimate of 1.5%. Gross margins were higher on a yoy basis by 47bps as commodity prices have eased. While staff costs as a percentage of sales were higher by 47bps yoy owing to operating deleverage the company was able to rein in other overheads by 66bps yoy as a percentage of sales. On a sequential basis, benefits of operating leverage were clearly seen with staff costs and other overheads as a percentage of sales plummeting by 423bps and 229bps respectively. Gross margins also improved 442bps sequentially.
Reduction in debt causes fall in interest costs
Interest costs also moved lower on a qoq basis, on the back of recent decrease in debt as the company was able to rein in its working capital requirements by reducing its inventories. Company reported a loss at the PAT level of Rs127 (before extraordinary items) as compared to our estimate of Rs1,508mn loss. Better performance was on the back of superior operational performance and lower interest expenses.
|As a % of net sales||Q4 FY14||Q4 FY13||bps yoy||Q3 FY14||bps qoq|
Upgrade to Market Performer 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 have raised our FY15 and FY16 earnings estimates and also raise our target price to Rs34 per share. We upgrade our rating to Market Performer.
|Y/e 31 Mar (Rs m)||FY13||FY14||FY15E||FY16E|
|yoy growth (%)||(3.3)||(20.3)||18.5||30.0|
|yoy growth (%)||(23.4)||-||(54.6)||2,959.0|