MOSL: ASHOK LEYLAND (Buy)-In-line performance-guides for 10-12% industry volume growth in FY20
Ashok Leyland: In-line performance; guides for 10-12% industry volume growth in FY20
(AL IN, Mkt Cap USD4b, CMP INR94, TP INR110, 17% Upside, Buy)
- High discounts impact realizations: AL's volumes grew 1% YoY in 4QFY19, with LCV volumes increasing by 28% YoY but M&HCV volumes declining by 0.9% YoY. Realizations declined 0.5% QoQ (+2.8% YoY) to INR1.49m/unit (our estimate: INR1.5m), reflecting a weaker M&HCV mix and higher discounts. Revenue grew 1% YoY to INR89.5b (in-line). For FY19, revenue/EBITDA/PAT grew 10%/6%/17%.
- Margins in line at 11%: Gross margin shrank 260bp QoQ (-150bp YoY) to 27.3% (our estimate: 28.1%) due to RM pressure and a weaker mix (low defence and exports share), partially offset by cost control-led lower other expenses (9.7% v/s our estimate of 11%). EBITDA margin contracted 80bp QoQ (-170bp YoY) to 11.1% (in-line). Further, lower tax due to the LCV merger benefit at 19% (our estimate: 20.7%) restricted the PAT decline to 11% YoY at INR6.6b (in-line).
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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