Dear all,
Healthy performance
§ In 2QFY17, Ashok Leyland reported standalone revenue of INR 46.2 billion (-6.9% YoY & +8.5% QoQ). Total volumes declined 10% YoY to 33,440 units, with MHCV volumes declining 15% YoY to 25,340 units while LCV volumes grew 9% YoY to 8,100 units.
§ The export business for 2QFY17 was at INR 70,00mn (+34% YoY) while the defence & aftermarket business revenues were at INR 2,000mn & INR 2,500mn, respectively. The management expects to make the export business 25% of total revenues in the next three to four years from existing 10%.
§ Gross margin expanded 189bps YoY on account of higher proportion of high margin defence, spares, and aftermarket & exports business. EBITDA stood at INR 5,365mn (-12.9% YoY & +12.6% QoQ). EBITDA margin declined by 80bps YoY to 11.6%. Reported PAT came in at INR 2,944mn (+71% YoY & +1.2% QoQ)
Valuation: Going ahead, we expect revenue to grow ~14% CAGR in FY17-18E and EBITDA margin to remain in the range of 11-12%. Currently, the stock is trading at P/E of 15.5X FY2018E. We maintain a BUY rating with a target Price of INR 112 assigning the PE of 20X FY2018E. Risks: Increase in discounts, rise in interest rates and commodity prices, slowdown in industrial activity and infra spending.
Regards,
CSEC Research
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