Ashok Leyland shares up 13% post Q1 nos; expects Q3 and Q4 to be better

On Wednesday, ALL reported a consolidated net loss of Rs 388.82 crore for the first quarter ended June 30 as against a net profit of Rs 274.96 crore in Q1FY20

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Ashok Leyland | Automobile | Q1 results

Shares of Ashok Leyland surged 13 per cent to Rs 61.05 on the BSE on Thursday after the company said it expects Q3 and Q4 of 2020-21 (FY21) to be better than the previous quarters while margins are also expected to rise going ahead and it will be much stronger when the market opens up.

On Wednesday, ALL reported a consolidated net loss of Rs 388.82 crore for the first quarter ended June 30 as against a net profit of Rs 274.96 crore in Q1FY20.

“With the pandemic hitting us, this has been one of the most challenging quarters for the industry. The company saw a significant decline in volumes, affecting the financial performance adversely,” Ashok Leyland MD and CEO Vipin Sondhi said.

ALL’s revenue from operations declined to Rs 1,486.04 crore during the first quarter from Rs 6,588.23 crore in the year-ago period.

Despite challenging times, ALL went ahead and launched the modular business platform that gives customers the flexibility to choose vehicles as per their requirements, he said, adding that it will be “a game changer in the industry,” he added.

Gopal Mahadevan, Whole Time Director & Chief Financial Officer, Ashok Leyland Limited added this is an exceptional quarter not just for the industry but also for the entire economy.

“We have used this time to drive disruptive cost efficiencies and productivity measures. The focus was also on maintaining liquidity, not just of the company but also our dealers and vendors. There have been tremendous learnings for us in doing business efficiently without dropping the ball on growth initiatives. We will come out of this much stronger,” he said.

“As we move out of the current financial year, I would say that we would see Ashok Leyland to be a much stronger, resilient, efficient and financially performing company,” said Mahadeven attributing the cost saving works to K54 project, which resulted the company to save around Rs 550 crore in 2019-20 and the ongoing implementation of ‘Project Reset’, which will look at increasing capabilities, cost optimisation, productivity among others.

He said, truck fleet capacity utilisation is now at 50-55 per cent currently; demand for trucks will rise only when infra projects pick up.

“We expect Q3 and Q4 to be better than previous quarters as infrastructure projects are picking up and many of the markets are started opening up,” said Mahadevan.

Five key focuses will be growing the domestic business and share, growing LCV business, increasing the international business, improving operational efficiency and cost saving measures and growing all the adjacent business including parts, defence. Back all this with driving digital to increase productivity, he added.

LCV demand is also picking up and the company will launch the products from the project ‘Phoenix’, the new LCV project will help to address the gap in the current LCV portfolios, in the next 60-90 days. Today the company’s LCV Dost addresses 2.5-3 tonne, while Phoenix project will help to address the new segment and its range would be 5-7.5 tonne.

ALL is ramping up at Hosur facility for LCV, which is an important derisking strategy of ALL. Parts business in the last 2-3 months clocking Rs 100-110 crore in the last three months.

Further, the company said it has adequate liquidity with 15-20 per cent price increase already implemented for M&HCV, while for LCV was around 15 per cent.

ALL plans to invest around Rs 500-600 crore of capex in FY21 in paintshop, line balancing, small investments in variants. “As we move forward we will review the investments,” said Mahadevan.