Ashok Leyland shares rise 3% despite 92% fall in March quarter profit

Shares of Ashok Leyland rose as high as 3.64 per cent to Rs 55.50 on the BSE on Friday despite the company posting a 92.31 per cent decline in consolidated net profit at Rs 57.78 crore in the fourth quarter of FY20 (Q4FY20).

The Hinduja Group flagship firm's revenue from operations during the quarter under review stood at Rs 5,088.04 crore as against Rs 9,874.04 crore in the year-ago period.

For fiscal year 2019-20, the company posted a consolidated net profit of Rs 459.80 as compared with Rs 2,194.60 crore in 2018-19. Revenue from operations in FY20 stood at Rs 21,951.27 crore as compared with Rs 33,196.84 crore in FY19, Ashok Leyland said in a regulatory filing.

"This has been a challenging year for the industry, which witnessed a significant decline in volumes (of 42 percent). Consequently, Ashok Leyland also saw a reduction in volume," Managing Director and CEO Vipin Sondhi said, adding that the company had achieved an earnings before interest, tax, depreciation, and ammortisation (Ebitda) of 6.7 per cent for the year despite drop in volumes.

At 10:40 AM, the stock had climbed off the highs and was trading 1.2 per cent lower as compared to 0.5 per cent gain on the S&P BSE Sensex. A combined around 3.2 crore shares have changed hands so far on the counter.

Motilal Oswal has a 'Buy' rating on the stock. In its rating rationale, the brokerage said Ashok Leyland's results were above estimate and highlighted the fact that realisations had improved owing to better product mix.

"Volumes declined around 57% YoY, adversely affected by lockdown during the last 10 days of Mar’20. Net realization improved 1.3 per cent YoY, reflecting better product mix. As a result, net revenues declined around 57 per cent YoY. Gross margins improved around 160 bps to 28.9 per cent," the brokerage said.

"EBITDA margins declined around 630 bps YoY to 4.8 per cent due to higher staff cost and adverse operating leverage. EBITDA declined around 81 per cent YoY. This clubbed with higher depreciation/interest cost resulted in recurring loss of ~Rs118m (v/s est. loss of Rs 379m). The stock trades at FY22E 9.7x EV/EBIDTA and 1.9xP/BV," it said.