Ashok Leyland expects stronger profits in H2 FY24: CFO Gopal Mahadevan
The company reported a net profit of Rs 561 crore for Q2 FY24.
Ashok Leyland, the country's second-biggest medium- and heavy truck maker, expects to deliver a better second half both on volumes and margins, on the back of strong demand and softening raw material prices.
Gopal Mahadevan, CFO at Ashok Leyland, said, "Our chairman had guided for a double-digit EBIDTA for FY24. In Q1, we had posted an EBIDTA margin of 10%; this has further gone up to 11.4%, which is among the highest quarterly margins we have recorded. With an expectation of a strong second half in terms of volumes and lower raw material prices, we are gaining momentum going into the second half. We expect a much higher profitability for industry and Ashok Leyland in the second half."
The CFO explained that there are three key factors that have supported the margins of Ashok Leyland: higher realisation, a 3-4% reduction in raw material prices, and significant effort made by the company through value addition and value engineering.
Ashok Leyland, the Indian flagship of the Hinduja Group, reported a net profit of Rs 561 crore for Q2 FY24, which grew 181% over the same period last year. The company's revenues for the quarter stood at Rs. 9638 crore, compared to Rs. 8266 crore in Q2 FY'23, posting 17% growth over last year.
The company's domestic MHCV volume, at 29,947 units, grew by 18% over Q2 last year in line with industry growth. LCV volumes for Q2 FY’24 at 16998 units are almost the same as Q2 FY’23 (17,040 nos.). Export volumes for the quarter (MHCV & LCV) at 2901 units were higher by 4% despite multiple socio-political challenges across the globe.
The company's top executive highlighted that, even from an EBIDTA perspective, it was the third consecutive quarter of double-digit margins for the company.
Ashok Leyland has posted seven consecutive quarters of over 30 percent market share. During Q2, the company outpaced the market and further grew its share to 31.6 percent, and it is well on course for a 35 percent share, said the company.
Favourable Macro-economic factors
On the way ahead, Shenu Agarwal, MD of Ashok Leyland, said the macroeconomic factors are favorable—right from spending on infrastructure to strong movement in the cement and coal sectors—and the rural markets and e-commerce business too are doing well.
"We still maintain our estimates for 8–10% growth for medium and heavy commercial vehicles. On the LCV side, the industry has not risen to the levels we expected of 4-5%, but there are some green shoots on the rural side and the e-commerce side, which will eventually drive the market to 4-5% growth," added Aggarwal.
As per Agarwal, the expansion of the product portfolio and geographical expansion will help the company accelerate its momentum going forward. "We are moving in the right direction on the margin front. For the mid-term, we had set a target of a 14–15 percent margin; directionally, we are on the right track; it may take 2-3 years. However, quarter on quarter, we should be able to improve our EBIDTA margins," reiterated Aggarwal.
The money will be used to provide necessary flood relief and support for the communities affected by the cyclone.
Ashok Leyland is one of the oldest corporates in Tamil Nadu.