Ashok Leyland Q4 Preview: Net profit likely to see robust growth, no big capex expected

A sustained momentum in demand for medium and heavy trucks will likely push up Ashok Leyland’s net profit for the quarter ended March, even as discounts remained high.

According to a Reuters poll of 21 analysts, the Chennai-based company is expected to report a rise of 38 percent in standalone net profit (year-on-year) to Rs 655 crore. The company will announce its results for the quarter on Friday.

During the same quarter in 2016-17, the third largest commercial vehicle maker had reported a net profit of Rs 476 crore. The company is likely to report some impact of raw material price rise during the quarter.

Net sales, as per the poll, is expected to see a rise of 26 percent to Rs 8,886 crore during the quarter as against Rs 7,057 crore reported during the same quarter in FY17.

Ashok Leyland, which is the leader in the bus segment, reported a rise of 23 percent in wholesale sales to 58,734 units as against 47,621 units sold in the same quarter in FY17.

Steps taken by most state governments to strictly follow rules over restrictions on overloading, has led to improvement in retail demand. In addition, launch of new products and new technology has also led to rise in demand.

A report by Nirmal Bang stated, “Improved road conditions clubbed with government policies enforcing a ban on truck overloading in key states has driven the recent strong volume growth in MHCVs, which has led to increased demand for higher tonnage vehicles. Higher tonnage vehicles have witnessed an improvement in overall share of the MHCV segment by 560bps since FY15. We note that ALL has a high mix of higher tonnage vehicles in its mix, and has been a key beneficiary, given its growing”.

The company has been able to hold on to its market share of 34 per cent because of a solid growth in the northern markets which is where it has grown its retail presence. It has promised to launch at least 30 new products (including variant of existing products) this year.

Ashok Leyland has announced a capital expenditure (capex) plan of Rs 1000 crore for coming years of which will be spend on investing in light commercial vehicle business, small investment in Andhra Pradesh plant, investing in BSVI vehicles, focus is also investing on electric vehicles and investing on new modular platform which will be used from FY20 onwards.