News

First Cut – Ashok Leyland Ltd

• Revenue grew by 10% y-o-y but declined 32% q-o-q to Rs. 9583 crore, led by an increase of volumes of 10% y-o-y to 48,763 units while realization per units stayed flat y-o-y. Gross margins declined by 90bps y-o-y and 18bps q-o-q to 28.5%.
• EBITDA growth was flat at Rs. 970 crore as cost increased (raw material, employee cost) but optimised inventory management and price hikes helped arrest the fall. EBITDA margins declined 105bps y-o-y and 452bps q-o-q to 10.1% during the quarter.
• PAT saw a small improvement of 3% y-o-y to Rs. 609 cores led by a higher other income which grew by 61% y-o-y to Rs. 85 crore. PAT margin declined 48bps y-o-y and 360bps q-o-q to 6.3% reflecting a relatively stable return despite macro challenges.
• Domestic volumes continue to shine (except buses segment) while export volumes declined by 18% y-o-y during Q1FY27.
• Non-CV businesses grew strongly, with revenues in domestic aftermarket / Power Solutions/ defense business up 12.7%/51%/64% YoY. Net cash reached Rs. 2,252 crore. Future Capex remains focused on new products, electric vehicles, and alternate powertrain technologies.
• With the domestic market resilience aided by aging fleet replacement and fleet addition from large operators and backed by new product launches with recovery in exports expected in H2, we believe Ashok Leyland has managed its macro headwinds effectively. We have factored a revenue/EBITDA/PAT CAGR growth of 11%/14%/15% respectively over FY26-FY28E. Price hikes will reduce some commodity pressure, but margins will continue to be stressed.  We value the company at 24x its FY28E EPS to arrive at a price target of Rs. 194. 

Results Highlights (Rs. Cr.)

Margin profile.