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Ashok Leyland Underweight
ASOK.BO, AL IN
Oct'10 unit sales moderate on emission roll over
• Ashok Leyland unit sales at 5,732 units (+7% yoy but -45% mom)
moderated sharply, given that the emission norms have rolled over to
BSIII from October onwards. Domestic segment sales declined -6%
yoy while exports at 1,104 units were up +177% yoy off a low base.
• Domestic sales decline (-6% yoy): Sales declined given the impact of
the emission roll over as well as the non availability of components as
the industry is transitioning to the BSIII standard.
• While sales of passenger vehicles was robust (+23% yoy), goods
vehicles sales moderated (+2% yoy -52% mom).
• Ashok Leyland has launched new models of tippers and tractor trailers
on the new U-truck platform. The vehicles, under the 16-49 tonne
category, would be available for pan-India sale in a phased manner
over the next six weeks. In the next 12 months, the company plans to
launch 15 more models in the domestic market.
• Management has guided for sales to moderate over 3Q, given that the
pre buying had resulted in strong sales growth over the prior quarter.
Kindly see our note: India Commercial Vehicles: Smoke Signals dated
Oct 18, 2010. In the post results conference call, management has
highlighted that margins over 2H are likely to be constrained given the
costs associated with the upgrade.
• Our View: We believe that growth rates are likely to moderate into 2H,
given a demanding base effect and the impact of the rollover norms.
We believe that the stock price is factoring in the growth ahead.
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