ASHOKLEY - Ashok Leyland Ltd. Share Price

In the earnings call held on May 23, 2025, management provided a positive outlook for FY '26, expecting growth across all vehicle categories, including LCV, ICV, MHCV goods, and passenger segments. Key points highlighted by the management include:

1. Market Dynamics: The domestic MHCV market showed resilience, with volumes up 27% sequentially in Q4 and 4% year-on-year. Management anticipates a positive environment supported by government spending on infrastructure and strong monsoon predictions.

2. Growth Indicators: The company aims to achieve a 35% market share in MHCVs and grow non-core businesses significantly. They expect to tap into pent-up demand driven by an ageing fleet averaging about 10 years.

3. Financial Performance: For Q4 FY '25, Ashok Leyland reported a record revenue of INR 11,907 crores (up 6% YoY) and a net profit of INR 1,246 crores (up 38% YoY). The full-year revenue reached INR 38,753 crores, while PAT surged to INR 3,303 crores (up 26% YoY).

4. Cost Management: The company noted that material cost as a percentage of revenue improved to 70.6% from 71.3% in FY '24, primarily through cost-saving measures, which they plan to optimize further despite facing potential input cost pressures from steel duties.

5. Strategic Initiatives: Focus will be on premiumization of products, enhancing service operations, and leveraging technology leadership in both conventional and alternative fuel domains. They have launched multiple products, including those catering to the electric vehicle segment.

6. Future Investments: Capex for FY '26 is projected at INR 1,000 crores, prioritizing electric vehicle technology and enhancing existing manufacturing capabilities.

7. Defensive Strategy: The company aims to double its defense business, which is currently profitable, through an expanding portfolio and potential joint ventures to collaborate on advanced technology.

Overall, the management exuded confidence about achieving sustained growth, supported by a well-structured strategy focused on innovation and market adaptation.

Here are the major questions and their respective answers from the Q&A section of the earnings transcript for Ashok Leyland Limited's Q4 FY '25 earnings call:

1. Question: "What do you expect for the MHCV segment, the bus segment and the LCV segment, given the AC cabin norms and safeguard duties on steel?" Answer: We align with peers on a positive expectation for FY '26 in the CV industry. Government capex is recovering, monsoon forecasts are strong, and pent-up demand exists, especially for trucks and buses. Expect substantial growth in MHCV, particularly in Q2 after a negative last year.

2. Question: "Could you give us growth momentum insights for buses, trucks, and LCVs?" Answer: Buses are leading due to strong demand; they are followed by tractor trailers. Tippers may surprise positively with increased core sector activity. LCVs and ICVs have no visible headwinds.

3. Question: "What cost inflation do you expect from safeguard duties on steel and AC cabin norms?" Answer: AC costs could rise by 0.5%-2%, with no pushback expected as the market is eager for these advancements. Steel prices may increase INR3-5/kg, but impacts will stabilize by Q3.

4. Question: "What cost levers will drive margin improvement for the next 1-2 years?" Answer: We focus on product value premiumization, maintaining our cost leadership, and enhancing service operations. Ambitious cost savings targets are set for continued margin growth despite inflationary pressures.

5. Question: "What is your capex target for FY '26, and where will investments be directed?" Answer: We plan around INR1,000 crores for capex, focusing on new technologies and electric vehicle components. Investment in subsidiaries could be INR500-750 crores, with Switch India needing around INR100-200 crores.

6. Question: "What's your outlook on the electric vehicle (EV) bus segment?" Answer: A positive outlook prevails for EV buses. The government is keen on inducting more electric buses, and our products are ready, mapping a clear growth trajectory for Switch India.

7. Question: "How do you view the defense business and the product pipeline?" Answer: The defense order book is solid, targeting to double top-line revenue in 2-3 years. We're expanding our portfolio beyond mobility, aligning with local production systems, which will enhance domestic capabilities.

8. Question: "What is your strategy for improving product performance in EV trucks?" Answer: We're leading in EV truck sales with multiple models. Our technology and product maturity are competitive. We aim to enhance tech further and engage with government to develop the EV ecosystem.

9. Question: "What are the dynamics surrounding Hinduja Leyland Finance and its upcoming listing?" Answer: HLF has an AUM of about INR61,700 crores, noted for solid growth. We're awaiting necessary approvals for its listing but believe it will unlock inherent value for our shareholders.

10. Question: "What potential does your non-MHCV business hold for future growth?" Answer: We aim for around 50% revenue from non-cyclical streams. Export and aftermarket revenues show strong growth potential, with a solid strategy for regional expansion in destinations like ASEAN.

These responses summarize critical insights from the earnings call while preserving both the details and context.