Can Ashok Leyland’s stellar run on margin continue in Q4?

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Subscribe to enjoy similar stories. Shares of Ashok Leyland Ltd closed nearly 8% higher on Wednesday, as investors cheered the company's robust margin performance in the December quarter (Q3FY25). While sales volumes were already anticipated, the key surprise came from the expansion of standalone gross margin to 28.5%, up from 27.8% a year ago.

This margin improvement was primarily driven by a 3.7% year-on-year (YoY) rise in the average selling price (ASP) per vehicle to ₹20.3 lakh, outpacing the 2.6% increase in material costs to ₹14.6 lakh. Read this | Tata Motors had accounting, PLI save the day in Q3, leaving investors unimpressed The entire gross margin expansion flowed through to the Ebitda margin, which stood at 12.8%—its second-highest level in at least ten quarters. Ebitda grew 9% year-on-year, despite revenue rising just 2.2% to ₹9,479 crore, underscoring the company’s pricing power and cost efficiency.

Investor optimism remained strong, with the stock edging higher on Thursday as well, signalling confidence in the company’s sustained margin expansion. Meanwhile, Ashok Leyland’s ASP increase in Q3 was more a function of a better sales mix, with higher-priced MHCV (medium and heavy commercial vehicle) sales volume growing by 2.5%. In comparison, LCV (light commercial vehicle) sales declined 7.9%.

Within MHCV, bus sales volume climbed 11%, driven by a 23% jump in export volume, even as truck sales were flat. The company’s strong margin performance gives hope that the management might succeed in achieving its medium-term target of a mid-teen Ebitda margin. In the near term, can gross and Ebitda margins rise further in Q4? The answer seems to be affirmative as the factors responsible for margin improvement have