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Revenue for Q1 came at INR 81,893 Mn up 13% on YoY basis and was down 30% on sequential basis which was mainly due to pre buying seen in Q4FY23. During the quarter, company's MHCV volumes have grown at 7% on a YoY basis surpassing the industry growth of 3%, resulting in market share improvement from 31.1% in Q1FY23 to 31.7% in Q1FY24. The revenue growth was primarily driven by the power solutions and after-market segments, with power solutions volumes doubling and aftermarket volumes increasing by 34% YoY in Q1FY24. EBITDA for the quarter stood at INR 8,207 Mn compared to INR 3,203 Mn YoY and Rs 12,757 Mn QoQ. The EBITDA margin of 10% was impressive, especially considering the seasonally lower Q1 figures. This was aided by the softening of commodity prices and operating leverage, which helped maintain double-digit margins. We are optimistic about further margin improvements in the remaining quarters of FY24. PAT came in at Inr 5,764 Mn down 23% on QoQ basis. Effective tax rate was at 7% due to reversed net deferred tax liability of INR 16 Mn.

Segmental Expansion: Unveiling Growth Opportunities:

Company's MHCV volumes have grown at 7% on a YoY basis surpassing the industry growth of 3%, resulting in market share improvement from 31.1% in Q1FY23 to 31.7% in Q1FY24. Bus TIV volumes grew by 39% and AL bus segment has grown at 93%. Bus market share has improved from 20.2% last year to 28.1% in Q1FY24. Truck TIV was almost flat at in Q1. MHCV industry is expected to grow at 8-10% in FY24 and AL is expected to surpass the industry growth. LCV segment has grown 3% on YoY basis. AL's share in the 2-3.5T segment is 20% and company is also considering to enter the 0-2T segment which is a high volume, mature and competitive market. We expect LCV volumes to grow at 5% in FY24.Power solution segment volumes doubled in Q1 and after market segment grew 34% on YoY basis. In defence The Company won orders worth Rs80 Mn in Q1FY24. The company has developed a wide variety of products and has a good order pipeline for FY24 and FY25. Overall, Demand momentum remains strong led by end user segments like steel, cement and infrastructure; growth trajectory should improve going forward. We expect volumes of MHCV and LCV to grow at 12%/5% respectively

Enhancing Profitability: Sustainable Double-Digit Margins:

Ebitda margin in Q1 stood at 10% which was impressive, especially considering the seasonally lower Q1 figures. This was aided by the softening of commodity prices and operating leverage, which helped maintain double-digit margins. Commodity prices are expected to soften further in coming month. Management expects to sustain these double digit margins and expects to move towards mid-teen margin in medium term. We are optimistic about further margin improvements in the remaining quarters of FY24. We expect margin to expand further around 60-70 bps in coming months of FY24

OTHER HIGHLIGHTES:

• Capex: In Q1FY24, the Capex reached INR 950 million, with a full-year Capex guidance ranging from INR 6,000 million to INR 7,500 million.

• Hinduja Leyland finance: The Company is getting merged with NXT Digital, a reverse merger that is expected to be complete by Q3 or Q4FY24.

• Switch mobility: Company has given Inr 20 Mn loan to switch mobility in Q1FY24. AL is planning to invest Rs. 1,200Cr. in switch mobility over next 12 months. Major portion of this investment will be used towards launching 2 new LCV products Electric DOST and BADA DOST and low floor 9M and 12M bus in both India and Europe. Switch confirmed order-book is at 2.5K units.

Outlook & Valuation:

The commercial vehicle market is currently experiencing a robust upswing, with strong underlying demand driving this growth. This up cycle is anticipated to surpass the performance of previous cycles, primarily fuelled by the unwavering demand from core industries and increased government investments in infrastructure projects. The stability of the demand environment, coupled with decreasing commodity prices and a favourable product mix, is poised to yield improved earnings for AL. We project the Ebitda margins to hover around 10.6% over FY24E and 11.7% over FY25E. Given the positive outlook for domestic M&HCV sales volume, we confidently maintain our BUY rating and with a target of Rs. 214 (valuing at 10.8x FY25E EPS & 14x FY25E PE).

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