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Ashok Leyland (AL) reported solid topline growth of 2.7% yoy and 3.8% yoy drop. Volumes during the quarter saw a moderation of 7% yoy growth and a 6% qoq fall. Realizations grew by 2% qoq, while fell by 4.4% yoy. The company witnessed a small decline in MHCV market share, while gained market share by 1-2% in the LCVs business, while bus market share saw a significant growth. EBITDA margins expanded to 12% up by 80 bps sequentially and 320 bps yoy from 8.8%. This was due to decreased commodity costs (72.2% of sales v/s 73.5% qoq and 76.3% yoy), prudent cost management, improved product mix as LCVs and spare parts revenues were good. Other income was down qoq at ?300 mn from ?475 mn, while tax rate was at 35.8% as the company is still going with the old tax regime. PAT came in at ?5.8bn to ?3.54 bn, up 64% yoy.

Volume growth to moderate in mid-term, FY 26 to see a revival We witnessed a fall in MHCV market share as CV cycle is losing its pace and according to the management, election in some states also led to market share fall. Going forward, on a high base, we expect Q4 volumes also to be subdued. However, underlying drivers such as infrastructure & mining, construction and demand from big fleet operators for transportation of cement, steel, coal, iron ore etc. is going at a steady pace. The company is also gaining order from the fleet owners. Demand for Tractor Trailers and Tippers is growing at a good speed. The demand for buses is also high with opening of schools, colleges & offices, orders from STUs etc. Also the EV versions of buses are getting an encouraging response. While Bus TIV grew by 38% in Q2, AL’s bus volumes grew by 68% in the same period and has an order book of >1500 buses, and LOI of ~10K buses. The deeper penetration has led to higher sales in Northern and Eastern parts of the country as well where AL is traditionally less present. The company has added 44 dealerships and 37 service centres in 9M FY 24 and has reached 491 dealers and 399 service centres across India. The company plans to touch 1000 dealers and service centres soon, mainly in the North and East India. For LCVs, AL has added 17 dealers and 53 service centres to take the dealer count up to 690 dealers.

AL launched various model variants in most of its segments across HPs. The company recently launched the e-Comet 1915 CNG, Boss 1815, Avatar 3525, couple of AC buses, Dost CNG and a defense vehicle to address the gap in its portfolio. All these models are fetching a very strong demand especially the Avatar range of trucks. AL has currently a strong order book for EV buses under its SWITCH India business arm pertaining to electrification of its vehicles. SWITCH has received several huge orders from STUs, while on the other hand AL has secured orders from private fleet operators.

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