ASHOKLEY - Ashok Leyland Ltd. Share Price

In the Q1 FY'26 earnings call for Ashok Leyland, management provided an optimistic outlook, indicating that the company has recorded its highest ever revenue, EBITDA, and net profit for this quarter. Net profit reached Rs. 594 crore, a 13% year-over-year increase. Revenue stood at Rs. 8,725 crore (up 1.5% YOY), with EBITDA of Rs. 970 crore (up 6.4%). The EBITDA margin improved to 11.1%, reflecting a 50 basis point increase from the previous year.

Key forward-looking points include:

1. Market Share Growth: The company's market share in the MHCV segment, excluding defense and EVs, rose to 31.1% (up from 29.8% YOY), while share in the 0 to 7.5 LCV segment improved to 12.9%.

2. Volume Projections: Despite a 2% decline in domestic MHCV industry volume in Q1, Ashok Leyland's domestic MHCV volume grew by 2% to 25,641 units. Management anticipates a double-digit revenue growth for FY'26.

3. Cost Management: Material costs were stable at 70.6% of revenue, reflecting effective cost-containment strategies despite market pressures.

4. Product Launches: Management plans to introduce several new products in both MHCV and LCV segments, including high-horsepower tippers and a new LNG segment offering later this year.

5. Capacity Expansion: A new plant in Andhra Pradesh is ramping up to 200 units per month, and a new bus plant in Lucknow is set to begin operations in Q3 FY'26.

6. Defense Sector Potential: The company holds a strong defense order book and is optimistic about further growth, with a pipeline exceeding Rs. 1,000 crore.

Overall, management expressed a robust confidence in achieving growth in both revenue and margins, particularly in the second half of FY'26, driven by new product launches and a favorable macroeconomic environment.

Q&A Section Summary from the Earnings Call Transcript

1. Gunjan Prithyani: "Firstly, on the margin side, can you give us some color on what were the key variables? Are there more commodity pressures to bear in mind in the next couple of quarters?"

   Shenu Agarwal: We managed to stabilize margins despite AC regulations. Customer adoption of AC vehicles was strong, allowing us to pass on costs and improve pricing. Steel prices are trending lower, which bodes well for margins. Overall, we controlled overheads effectively, with better product mix and non-CV revenue growth contributing significantly.

2. Gunjan Prithyani: "What is the process forward regarding Hinduja Leyland Finance's restructuring? What is the situation in the financing landscape for CVs?"

   K. M. Balaji: The restructuring process involves several regulatory steps and will likely take two to three quarters. As for CV financing, we're aware of some distress in the sector but, from our internal checks, HLF does not see any current red flags.

3. Kapil Singh: "What is your outlook for demand in the MHCV segment given existing market conditions? What about replacement demand?"

   Shenu Agarwal: We expect mid-single-digit growth in MHCV demand. While there's aging fleet pressure, improved CAPEX and declining interest rates should trigger demand. We observed July growth at around 5%, indicating a favorable outlook.

4. Kapil Singh: "Can you elaborate on the total investment plan for OHM, given the upcoming bus operational targets?"

   Shenu Agarwal: OHM currently operates 800 buses with plans to induct more. We're investing Rs. 300 crores for additional buses. Future funding will be assessed as needed, but this project remains vital for growth.

5. Chandramouli Muthiah: "What is your medium-term assessment of capacity needs? Given anticipated demand growth, how will you adapt?"

   Shenu Agarwal: Current overall capacity is sufficient for the next two to three years. However, we plan to increase fully built bus capacity significantly from 950 to 1650 units per month to meet growing demand.

6. Pramod Kumar: "What is the current status of Hinduja Leyland Finance, particularly regarding asset quality?"

   K. M. Balaji: HLF's AUM stands at Rs. 50,000 crores, with a PAT of Rs. 160 crores and NNPA at 1.63%. While credit quality is under scrutiny industry-wide, our portfolio remains stable.

7. Raghunandhan NL: "What are your expectations for defense orders moving forward?"

   Shenu Agarwal: We are optimistic about defense with an order book exceeding Rs. 1,000 crores and significant tenders pending. This should support our growth targets for the upcoming year.

8. Raghunandhan NL: "Could you confirm the variance in defense revenue between Q1 this year and last?"

   Shenu Agarwal: Revenue dropped significantly from around Rs. 400 crores to approximately Rs. 150 crores in Q1 this year, largely due to an unusual previous year's performance, but we expect recovery.

This summary captures essential questions and concisely articulates management's responses from the earnings call, retaining key details and forward-looking insights.