Ashok Leyland’s Q3 net profit jumps 60% YoY on double-digit margin

Ashok Leyland posted strong growth of 60% in its standalone net profit for the October-December quarter despite a low-single-digit growth in its revenue as the company managed to improve its margins considerably on the back of better price realisation and lower input cost.

The commercial vehicle major’s standalone profit for the quarter came in at Rs 580 crore, compared with Rs 361 crore in the year-ago quarter. Revenue from operations grew 2.7% on year to Rs 9,273 crore. The revenue growth was restricted to low-single digits because of the marginal decline in the number of vehicles sold.

The flagship of the Hinduja Group sold a total of 47,241 commercial vehicles during the quarter, down from 47,568 units in the year-ago quarter. This decline can be attributed to the weakness in the medium and heavy commercial vehicle segment. The volumes were slightly higher in the light commercial vehicle segment. Exports, however, registered a growth of 6.5% to 3,128 units.

The weakness in overall volumes was offset by higher realisation from price hikes and mix, and lower input costs. This is reflected in the company’s operating performance. Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose around 40% to Rs 1,114 crore while EBITDA margin, or operating profit margin, expanded to 12% from 8.8% in the year-ago quarter.

“The current quarter saw the confluence of good volumes, better price realisation, and higher cost savings, thus helping us achieve better profitability. Other businesses such as After-market, Power Solutions and Defence also continue to strongly contribute to our top line and margins,” Managing Director and Chief Executive Officer Shenu Agarwal said.

The company's total expenses during the quarter dropped by 1.2% on the year to Rs 8,399 crore because of the decline in the cost of materials and services consumed. The cost of materials and services consumed fell 9% during the quarter to Rs 6,555 crore. Also, the cost of materials and services as a percent of revenue from operations came down to 70.7% from 79.8% in the comparable period. 

Going forward, the company plans to continue with its strategy to improve the margins with new products, cost optimisation, and pricing, and remains optimistic about growth in the commercial vehicle industry over the medium and long term.

“On back of new differentiated products, deeper focus on cost optimisation, and with continued discipline on pricing, we shall relentlessly pursue improvement in profitability. We remain confident and optimistic about the growth of the CV industry in the medium and long term as macroeconomic factors continue to be favourable,” Agarwal said.