Recently Sharekhan has released their latest Alpha Delivery Pick and posted an indepth write up on ASHOK LEYLAND Share Price Analysis. This post has been re-written from an internal publication of Sharekhan.
Ashok Leyland (ALL) is one amongst the few pure play major business vehicle makers in Republic of India. ALL is the second largest player across numerous sections with an overall market share of ~33% within the M&HCV segment. On exports, the corporate has initiated new methods of penetrating newer African markets in addition as consolidating markets like geographical area. On defence additionally, ALL remains assured that segments like armored vehicles would be ready to win orders competitive with alternative domestic majors like Tata Motors, M&M, etc. The management has highlighted plenty of product initiatives area unit beneath place within the section and will unravel as an honest chance within the years to come.
Ashok Leyland’s (ALL) operative performance in Q3FY017 was impacted by evaluation pressure as a result of government’s demonetization move. The company’s topline grew by eight percent YoY to Rs 4,431 crores as against our estimate of Rs 4,641 crores, driven by a seven percent YoY growth in volumes, whereas the realisation was flat. Higher discounting as a result of volume retardation and also the hardening of input prices resulted within the operative margin of profit (OPM) getting by 60BPS YoY to 10.3 percent.
The demonetization move hit the Commercial Vehicle (CV) trade volumes in Nov and Dec, with the trade sales dropping by thirteen percent YoY. ALL’s volumes declined by four percent YoY throughout same period of last year. At present, matters has improved significantly, because the tight liquidity state of affairs has mitigated, and also the pressure on fleet operators’ capital (fuel expenses, toll payments and driver salaries area unit money based) has subsided. Secondly, the new BS-IV emission norms would be enforced from April first, 2017 on a pan-India basis. Also, the new Cab Code, that makes AC obligatory in CVs, is predicted to come back in going forward. Consequently, the truck valuations are set to rise by around 7%-8% from the present levels, that is probably going to lead to a major quantity of pre-buying. We also expect ALL’s Q4FY2017 volumes to grow by sixteen percent YoY.