Ashok Leyland, one of India’s leading commercial vehicle (CV) manufacturers, witnessed a significant rise in its share price, gaining nearly 3% on May 27th . This surge followed the company’s robust Q4FY24 financial results, which led brokerages to maintain a bullish stance on the stock. The positive performance was driven by strong demand across various business verticals, leading to optimistic industry prospects in the short to medium term.
Impressive Q4FY24 Financial Performance
In the fourth quarter of FY24, Ashok Leyland reported a net profit of ₹933.69 crore, marking a 16.73% increase from ₹800 crore in the same quarter the previous year. This growth was attributed to strong demand and an all-round performance across its business segments. The company also emerged as a market leader in the Medium and Heavy Commercial Vehicle (M&HCV) Bus segment, with a market share gain of 5.8 percentage points.
The company’s overall CV volumes stood at 194,553 units, close to the previous high of 197,366 units. Despite a 6% year-on-year (Y-o-Y) decrease in volumes to 56,267 units, the operating income saw a 3% decline Y-o-Y to ₹11,277 crore. However, the earnings before interest, tax, depreciation, and amortization (EBITDA) margin improved significantly to 14.1% from 11.0% in Q4FY23. Profit after tax (PAT) also jumped 19.8% Y-o-Y to ₹900 crore from ₹751 crore.
Ashok Leyland’s cash flow generation for the year was robust at around ₹4,000 crore, resulting in a net cash-positive balance sheet. The company generated ₹1,658 crore in cash during Q4FY24 alone. This strong financial performance reflects the company’s strategic focus on cost efficiencies and profitable growth.
Ashok Leyland Share Price History
Ashok Leyland, a key component of the S&P BSE 100, has shown impressive gains according to BSE analytics as of May 27. Over the past week, its shares have risen by 1.32%, and by 6.23% over the past two weeks. In the last month, the company’s stock increased by 18.59%, and over the past three months, it saw a rise of 21.01%. On a year-to-date (YTD) basis, Ashok Leyland’s shares have appreciated by 13.14%. Looking at longer-term performance, the stock has climbed 40.09% over the past year, 49.22% over two years, 68.44% over three years, 124.83% over five years, and an impressive 540.94% over the past decade.
Ashok Leyland Dividend History
In April of this year, Ashok Leyland paid a dividend of ₹4.95. In July of 2022 and 2023, the company announced dividends of ₹1 and ₹2.6, respectively. In 2020 and 2021, Ashok Leyland declared dividends of ₹0.5 in March and ₹0.6 in August.
Analyst Views & Future Prospects
Brokerages have maintained their positive outlook on Ashok Leyland shares due to expectations of volume growth, industry growth prospects, and attractive valuations. On May 27th Ashok Leyland’s shares reached a record high of ₹222.80, rising 6% during intraday trade on the Bombay Stock Exchange (BSE) amid heavy volumes. This surge was a response to the company’s healthy operational performance in the March quarter.
Analysts at ICICI Securities highlighted the management’s positive commentary on demand prospects, particularly from replacement fleet operators. However, the management refrained from providing specific industry volume growth guidance for FY25. In the interim, Ashok Leyland aims to focus on internal cost efficiencies, targeting a mid-teens EBITDA margin profile. The company’s electric vehicle (EV) segment, Switch Mobility India, also turned EBITDA positive for the quarter, indicating a promising future in the EV bus market.
Despite an uncertain demand outlook by industry players and a significant run-up in stock prices over the past month, ICICI Securities has adopted a neutral view on the stock. In contrast, analysts at JM Financial Institutional Securities have maintained a ‘buy’ rating on Ashok Leyland with a March 2025 target price of ₹275, based on a forward price-to-earnings (P/E) ratio of 20x.
The demand momentum in the domestic market remains healthy, driven by a pick-up in replacement demand. Ashok Leyland reiterated its focus on profitable growth and aims for higher market share in both M&HCV and Light Commercial Vehicle (LCV) segments through network expansion and addressing product gaps. Additionally, benign commodity costs and strategic cost control initiatives are expected to support the company’s profitability.
Ashok Leyland’s export volumes grew by 5% during the year, despite challenging conditions in target markets. The Power Solutions and Defence Businesses also posted impressive growth, further contributing to the company’s overall performance. The company is optimistic about its industry prospects, backed by anticipated robust growth in the Indian economy.
Strategic Focus and Market Leadership
Ashok Leyland’s strategic focus on cost efficiencies, network expansion, and addressing product gaps has positioned it well for future growth. The company’s emphasis on profitable growth and market leadership in the M&HCV Bus segment underscores its commitment to maintaining a competitive edge in the industry.
The company’s robust cash flow generation and net cash-positive balance sheet provide a strong foundation for future investments and growth initiatives. Ashok Leyland’s management has expressed confidence in the company’s ability to navigate uncertain market conditions and capitalize on emerging opportunities in the commercial vehicle and EV segments.
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The medium-term demand drivers for Ashok Leyland include higher infrastructure spending, the implementation of the vehicle scrappage policy, and the ongoing replacement demand in the domestic market. These factors are expected to drive growth in the CV industry, benefiting Ashok Leyland’s market position.
