Ashok Leyland stock rallies 6% on best-ever Q3 earnings

Shares of Ashok Leyland rallied 6 per cent to Rs 216.25 on the BSE in Wednesday’s intra-day trade amid heavy volumes after the company delivered strongest-ever earnings for the third quarter (October to December) of the financial year during Q3FY25. With a net cash of Rs 958 crore, the company turned cash positive at end of the quarter as against net debt of Rs 1,747 crore at end of Q3FY24.

 

The stock of commercial vehicles (CV) bounced back by 8 per cent from its intra-day low of Rs 199.75 on the BSE. At 02:33 PM; Ashok Leyland was quoting 6 per cent higher at Rs 215.95, as compared to 0.42 per cent decline in the BSE Sensex. The average trading volumes at the counter jumped over three-fold. A combined 19.35 million equity shares changed hands on the NSE and BSE.

 

Ashok Leyland achieved an all-time high Q3 net profit of Rs 762 crore, an increase of 31 per cent over same period last year. The company recorded all-time high Q3 revenues of Rs 9,479 crore, as against Rs 9,273 crore in Q3FY24. In Q3FY25, export volume increased 33 per cent YoY to 4,151 units in Q3FY25 against 3,128 units in the same period last year.

 

The earnings before interest, tax, depreciation and amortization (EBITDA) grew 8.7 per cent year-on-year (YoY) to Rs 1,211 crore; margins improved to 12.8 per cent from 12.0 per cent. The company said it registered double-digit percentage EBITDA for the 8th consecutive quarter.

 

Ashok Leyland's domestic Medium and Heavy Duty Commercial Vehicle (MHCV) market share continues to be over 30 per cent. The company also has maintained market leadership in the Bus segment.

 

Relative to Q2, the MHCV market has revived significantly in Q3, and is expected to improve further as we enter the last quarter. The company’s focus remains on profitable growth through product premiumization, cost leadership, better service reach and enhanced value-added services. Non-CV businesses have done well and offer more headroom for growth. The management remains optimistic about the growth of the CV industry in the medium and long term as macroeconomic factors continue to be favorable.

 

Meanwhile, the management said sales in international markets are showing strong growth, and expect this momentum to accelerate with the launch of new products. The management further said the company is also continuing to invest in battery electric and alternate fuel products to maintain its technology leadership position. Switch has a healthy order book and has plans to come out with a series of products in the next 12 months. 

Mirae Asset Sharekhan reiterates its BUY rating on Ashok Leyland on its focus on profitability over plain vanilla volume growth strategy, sustaining EBITDA margin over the 10 per cent mark, passing on cost inflation to customers to save profitability, its plans to expand its non-vehicle business, and healthy order inflow in the bus segment.

 

The long-term outlook for the bus segment remains strong, with continued demand expected. In its bus segment, Ashok Leyland has been gaining healthy traction. The company continues to receive new orders from state transportation units. The average age of MHCVs has increased to 10 years in FY2023 compared to around 8.5 years during FY2014 to FY2019. As the average age of MHCVs increases, replacement demand will continue to rise in the future, the brokerage firm said in the December 2024 report.