Ashok Leyland Q2 Results Review- Subdued; Margin Expansion Ahead With Ongoing CV Up-Cycle: Reliance Securities
We expect ongoing up-cycle to continue over next one-1.5 years, which would bring back high earnings growth and higher valuation.
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Reliance Securities Report
Ashok Leyland Ltd. recorded subdued performance in Q2 FY23 with Ebitda margin coming in at 6.5% (up 384 basis points YoY/up 207 bps QoQ), versus our estimate of 6.8% due to higher employee cost, despite lower raw material cost and control on other expenses.
Revenue increased 85% YoY (up 14% QoQ) to Rs 82.7 bllion, versus our estimate of Rs 83.4 billion.
Revenue growth on YoY basis was primarily due to average selling price growth of 13% YoY (flat QoQ) due to price hike and product mix.
Ashok Leyland's volume growth was 65% YoY (up 14% QoQ) with higher contribution from medium and heavy commercial vehicles. It reported an Ebitda of Rs 5.4 billion (up 299% YoY/ up 68% QoQ)), 5.6% below our estimate of Rs 5.7 billion due to higher employee cost, which grew 32% YoY and 18% QoQ (Increments and bonuses given during the quarter), despite lower commodity cost and control on other expenses.
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