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LKP Securities
Target: ₹173
CMP: ₹141.1
Ashok Leyland (AL) reported top-line growth of 58 per cent q-o-q and 25 per cent y-o-y at ₹8,740 crore, driven by 43 per cent q-o-q and 11 per cent y-o-y volume growth.
The realisations were the main drivers of this growth, which were up 13 per cent y-o-y and 10.5 per cent q-o-q on price hikes taken during the quarter and better product mix: Higher mix of the M&HCV segment as well as higher mix of tractor trailer and >25T segment within the truck segment; lower discounts; and price hikes led to growth in ASPs and EBITDA margins which came in at 8.9 per cent, 490 bps up q-o-q and 130 bps up y-o-y.
The company booked a gain of ₹470 crore: ₹570-crore gain pertaining to impairment/provision reversal in the value of subsidiaries; and ₹32.80-crore gain in relation to onerous contracts of EMAAS business, partly offset by ₹140-crore loss on account of loss on FV of investment.
During the year, AL reported 40 per cent topline growth with EBITDA margins at 4.6 per cent and Adj PAT at just ₹31 crore mainly on Q4 outperformance.
The near-term demand recovery may come under pressure due to higher interest costs and fuel cost hikes; however, we remain optimistic over the medium term, led by pickup in the replacement segment given higher fleet utilisation levels and fleet operators’ profitability. We maintain Buy with a higher target of ₹173.
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