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Ashok Leyland - Entering A Period Of Better Profitability: ICICI Securities

Industry demand continues to be robust led by growth in inter alia infrastructure, mining and e-commerce segments.

<div class="paragraphs"><p>Ashok Leyland Ltd.'s quality check unit. (Source: Company website)</p></div>
Ashok Leyland Ltd.'s quality check unit. (Source: Company website)

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ICICI Securities Report

We recently interacted with Ashok Leyland Ltd. management in order to understand the company’s growth and profitability outlook. Following are the key takeaways:

  1. industry demand continues to be robust led by growth in inter alia infrastructure, mining and e-commerce segments;

  2. need for new trucks is being driven by replacement demand, ageing of fleet population and better productivity of new multi-axled trucks;

  3. small truckers are yet to push new truck demand with goods medium and heavy commercial vehicle market already moving closer to FY19 levels, implying that the present commmercial vehicle upcycle is still far from peaking out;

  4. with production scale of ~9,000-10,000 M&HCVs a month, Ashok Leyland is currently operating at ~6% Ebitdam versus ~10% in FY17, at a comparable scale.

  5. With the lag effect of falling steel prices, gradual price hikes and improving mix, Ashok Leyland is looking forward to move up to more than 10% Ebitdam in the coming quarters;

  6. targeted capex is expected to be sub-Rs 7 billion in FY23 given that there is no need for capacity addition.

Company expects to close Switch Mobility funding needs in FY23 itself.

Click on the attachment to read the full report:

ICICI Securities Ashok Leyland Mgmt Update.pdf

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