MOSL: ASHOK LEYLAND (Buy)-Below est.; op. lev. offsets higher RM cost; downgrade EPS
ASHOK LEYLAND: Below est.; op. lev. offsets higher RM cost; downgrade EPS
(AL IN, Mkt Cap USD4.9b, CMP INR123, TP INR155, 26% Upside, Buy)
- AL’s 4QFY21 performance was impacted by rising commodity costs. Its performance continues to remain weak v/s peers. It remains a pure play on a CV cycle recovery, with scope for expansion of revenue pools.
- We have downgraded our FY22E/FY23E EPS estimate by 33%/5.5% due to COVID-related volume cuts. We maintain our Buy rating with a TP of INR155 per share.
- Commodity cost inflation hurts margin
- Revenue/EBITDA grew ~82%/192% YoY to INR70b/INR5.34b in 4QFY21. Adjusted PAT stood at INR2.1b. Revenue/EBITDA declined by ~12%/54% to INR153b/INR5.4b in FY21. Adjusted loss stood at INR3b in FY21 (v/s a PAT of INR3.4b in FY20).
- Net realization improved 5.5% YoY (10% QoQ due to higher M&HCV volumes) to INR1.6m (in line). Volumes grew 73% YoY (+32% QoQ).
- Gross margin declined by 580bp YoY (-250bp QoQ) to 23.1% (est. 24.2%), impacted by commodity cost. Operating leverage more than offset the impact of higher RM cost, resulting in a 290bp YoY (+240bp QoQ) improvement in EBITDA margin to 7.6% (est. 8.1%).
- EBITDA was up 192% YoY (+110% QoQ) to INR5.34b (est. INR5.56b). Higher depreciation and interest led to recurring PBT of INR2.8b (est. INR3.2b v/s a loss of INR34m in 4QFY20). Adjusted PAT stood at INR2.1b (est. INR2.6b v/s a loss of 118m in 4QFY20).
Ashok Leyland Limited is a holding company. The Company is engaged in Commercial vehicles and related components. Through its subsidiaries, it is engaged in manufacturing and trading in Medium and Heavy Commercial Vehicle, Light Commercial Vehicles, Passenger vehicles, automotive aggregates, vehicle financing and engineering design services. It offers a range of 18 to 80-seater buses under categories, such as city application and electric buses. It offers a range of trucks, which include long haul trucks, mining and construction trucks, and distribution trucks. It designs, develops and manufactures defense vehicles for armed forces. It offers Light Vehicles, which include DOST, PARTNER, STiLE and MiTR. It offers power solutions for electric power generation, agricultural harvester combines, earth moving and construction equipment, and marine and other non-automotive applications. It has operations in India, Sri Lanka, Bangladesh, Mauritius, the Middle East and Africa.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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