Ashok Leyland declines for fifth straight day on weak Q4 results

The company reported a net loss of Rs 57 crore in Q4FY20 against a net profit of Rs 806 crore in the year-ago quarter.

Shares of Ashok Leyland were trading lower for the fifth straight day, down 2 per cent at Rs 47.30 on the BSE on Tuesday. The stock has slipped 16 per cent in one week on weak results for the quarter ended March 2020 (Q4FY20).

Ashok Leyland, the flagship company of the Hinduja Group, reported a net loss of Rs 57 crore in Q4FY20 due to lower revenue on account of the drop in volumes. The commercial vehicle manufacturer had posted a net profit of Rs 806 crore in Q4FY19.

The company’s revenue during the quarter under review declined by 57 per cent to Rs 3,838 crore against Rs 8,846 crore in the corresponding quarter of previous fiscal. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins contracted sharply to 4.8 per cent from 11.1 per cent in the year-ago quarter.

The domestic medium and heavy commercial vehicle (MHCV) industry has been in a downturn since November 2018, and FY20 has been the worst year in the past 20 years. Analysts at Emkay Global Financial Services expect a revival by FY21 end, led by a low base, replacement demand, and gradual pickup in economic activity.

“In the last three up-cycles, the average period of positive growth has been 4 years, and minimum growth from trough to peak is 90 per cent. Ashok Leyland is likely to gain share from 32 per cent in FY20 to 33 per cent in FY22E, led by new products, strong exposure to above the 25T segment, and continuing focus on network expansion,” the brokerage firm said in result update.