A sturdy margin show ahead to support Ashok Leyland stocks

livemint.com:

Ashok Leyland Ltd has clocked a double-digit Ebitda, (earnings before interest, taxes, depreciation, and amortization) margin – a key striking feature of the commercial vehicle maker’s FY24 results. Standalone margin expanded as much as 390 basis points (bps) year-on-year to 12% (one basis point is 0.01%). The last time Ashok Leyland’s margin for the full year was in double-digit was in FY19.

Ebitda growth in FY24 stood at 57% year-on-year to ₹4,607 crore on a revenue growth of just 6% on a relatively high base. Softer raw material costs and slower growth in staff costs were the chief drivers of profitability. Similar trends have played out in the March quarter (Q4FY24), too.

Ebitda margin rose 316 bps year-on-year to 14%, surpassing analysts’ estimates. This is also better than Tata Motors Ltd.’s standalone India commercial vehicles segment Ebitda margin of 12%. The upshot: Ashok Leyland’s Q4 Ebitda growth came in at nearly 25% despite revenue falling by 3% on the back of 6% drop in volumes.

Robust gross margin improvement, better realization and mix lent support to earnings. Also Read: Ashok Leyland margin a show stopper in Q3 Investors have acknowledged. On Monday, the shares jumped 5%, also scaling a new 52-week high of ₹223.65 apiece; returns for the last one year stand at a cool 50% roughly.

Following the results, some analysts have raised the company’s earnings estimates for this year and the next. Over the medium-term, Ashok Leyland’s management is keen that its Ebitda margin reach mid-teens, helped by discipline on discounts, pricing actions and cost control initiatives. The company is optimistic on volume prospects in FY25 and believes that fears of an election-related slowdown have not played out.