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Ashok Leyland (AL) reported decent topline growth of 13% yoy while declined by 30% qoq on expected lines. Volumes during the quarter moved up by 4% yoy, while de-grew by 31% yoy. Realizations grew handsomely by 8.8% yoy while slightly growing sequentially. The yoy growth came on the back of strong macro activities. The company gained market share yoy at 31.7% up by 2o bps in the MHCV segment, while the Bus segment massively gained market share at 28.1% from 20.2% yoy. EBITDA margins expanded to 10% up by 560 bps yoy and dropped by 100 bps qoq. This was due to decreased commodity costs (73.7% of sales v/s 75.6% qoq and 79.3% yoy) and lower other expenses (9.7% v/s 10.1% of sales yoy) led by lower discounts and cost efficiency measures. Other income was up yoy at ?512 mn, while tax rate was at 34.2% (excluding the one-time tax credit of ?1.7 bn) as the company is still going with the old tax regime. PAT adjusted for the one time tax credit mentioned above came in at ?4.09bn significantly up from ?550 mn yoy and lower than ?6.95 bn qoq. The sequential decline in numbers was on the back of pre-buying seen in Q4 just before the On Board Diagnostics -2 (OBD-2) regulations were implemented leading to hike in prices and demand drop in Q1.

Geographical strengthening and strong product pipeline to drive volumes in FY24

We witnessed a superb performance by the CV sector in FY 23, especially on its heavier side due to economic recovery, absence of pandemic and underlying drivers such as infrastructure & mining, construction and demand from big fleet operators. As the market has completely opened up, we see the truck numbers moving up further. We saw demand for tractor trailers, tippers, haulage and MAVs moving up strongly. In Q1, on high base of Q1 FY23, TIV for MHCV grew by just 3% in Q1 FY24 on a high base, while AL volumes grew by 7% in the same period indicating market share growth (31.7%). The demand for buses is too high with opening of schools, colleges & offices and EV versions of buses getting an encouraging response. This along with various partnerships and opening of dealerships across India has led to higher market share which rose at 28.1% from 20.2% yoy. STU demand (7-8% of total bus demand), ICV passenger/school buses (71-72%) and private buses (20%) are the main contributors of bus demand. The deeper penetration has led to higher sales in Northern and Eastern parts of the country as well where AL is traditionally less present. .AL’s market share in these geographies has increased to ~25%, up from <20% a year ago.

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