Ashok Leyland Q4 Review - Tighter Cost Control Aids Margin: ICICI Securities

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ICICI Securities Report

Ashok Leyland Ltd.’s Q4 FY21 operating performance beat consensus estimates as Ebitda margin came in at 7.6%.

This was driven by driven tighter control on fixed costs, strong operating leverage even as gross margins shrunk (~248 basis points QoQ to 23.1%) due to high input cost pressures.

Key industry monitorables:

1. Pace of recovery of economic activity and capex trends in key segments (e.g. infrastructure).

2. Used vehicle demand/pricing trends.

3. Trends in freight rates.

We estimate the company’s volumes to rebound at ~29% compound annual growth rate FY21-FY23E driven by medium and heavy commercial vehicle revival coupled with market share gains in light commercial vehicle segments.

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