Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ashok Leyland (AL)
Automobiles
Higher interest/depreciation costs impact earnings. Adjusted profit of Rs796 mn (-
35% yoy, -73% qoq) was 7% below our estimates due to sharp increase in interest and
depreciation costs during the quarter. EBITDA was 3% higher than our estimates due to
higher defence kit and spare part sales in the quarter, in our view. We expect volume
growth to remain muted in FY2012E due to slowdown in truck volumes and we do not
see any triggers for stock performance. We maintain our SELL rating on the stock.
1QFY12 performance impacted by sharp decline in volumes and higher interest/depreciation costs
�� Adjusted profit of Rs796 mn was 7% below our estimates due to higher interest and
depreciation expenses during the quarter. Increase in working capital, increase in production at
Pantnagar plant and higher amortization of product development expenses led to a sharp
increase in interest and depreciation costs, in our view.
�� Net sales were in line with our estimates. Volumes declined by 35% qoq while product mix
deteriorated during the quarter. Truck volumes comprised 71.4% of total volumes in 1QFY12
versus 75.7% in 4QFY11. Bus volumes increased in the product mix comprising 27.6% of total
volumes in 1QFY12 versus 26.2% in 4QFY11. Truck segment is more profitable than the bus
segment. We believe factory/dealer inventory has increased further as production exceeded
sales in 1QFY12. The company had increased prices by 2% in April 2011 which also supported
average selling prices despite an adverse swing in product mix.
�� EBITDA margins came in at 9.4% (after adjusting for Rs94.6 mn reduction in other expenses as
the company modified the method of amortization of value of leasehold land from lower of 40
years and period of lease to period of lease). EBITDA margins were slightly ahead of our
estimates which we believe could be due to higher defence kit and spare part sales during the
quarter. EBITDA margins declined by 3.9% qoq and were 30 bps above our estimates.
We maintain our SELL rating on the stock
We maintain our SELL rating on the stock as we forecast a muted volume growth for the company
over the next two years. We expect earnings to decline by 11% yoy in FY2012E due to muted
volume growth and decline in EBITDA margins. Our target price of Rs52 (based on 11X FY2013E
EPS) remains unchanged and we do not see any triggers for stock performance.
In-line quarter operationally but high interest/depreciation costs impact earning
Adjusted net profits of Rs796 mn (-35% yoy, -73% qoq) were 7% below our estimates due
to sharp increase in interest and depreciation costs during the quarter. Revenues were in line
with our estimates but EBITDA was 3% above our estimates. EBITDA margins came in at
9.4% (after adjusting for Rs94.6 mn reduction in other expenses as the company modified
the method of amortization of value of leasehold land from lower of 40 years and period of
lease to period of lease).
Other key highlights of the results
�� Volumes declined by 35% qoq while product mix deteriorated during the quarter. Truck
volumes comprised 71.4% of total volumes versus 75.7% in 4QFY11. Bus volumes
increased in the product mix comprising 27.6% of total volumes in 1QFY12 versus 26.2%
in 4QFY11. Truck segment is more profitable than the bus segment.
�� We believe inventory has increased further during the quarter from 10,000 units in April
2011 as production exceeded sales during the quarter. The company produced 21,969
units in 1QFY12 and sold 19,277 units during the quarter. We expect 2QFY12E volumes
to also remain weak as the company corrects its inventory.
�� Average selling prices were flat during the quarter which we believe could be supported
by - 2% increase in prices in April 2011 and increase in defence kit and spare part sales
during the quarter.
�� We also believe production at Pantnagar plant has also declined sequentially during the
quarter which could have impacted profitability.
�� Staff cost and other expenses as a percentage of sales also increased during the quarter
due to negative operating leverage.
�� Interest costs increased by 18% qoq due to increase in working capital levels, in our view.
�� Depreciation costs also increased significantly due to increase in production at Pantnagar
plant and increase in product development expenses due to increase in research and
development costs on new U-trucks.
�� Tax rate was 24.2% in 1QFY12, lower than normal tax rate due to MAT credit.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ashok Leyland (AL)
Automobiles
Higher interest/depreciation costs impact earnings. Adjusted profit of Rs796 mn (-
35% yoy, -73% qoq) was 7% below our estimates due to sharp increase in interest and
depreciation costs during the quarter. EBITDA was 3% higher than our estimates due to
higher defence kit and spare part sales in the quarter, in our view. We expect volume
growth to remain muted in FY2012E due to slowdown in truck volumes and we do not
see any triggers for stock performance. We maintain our SELL rating on the stock.
1QFY12 performance impacted by sharp decline in volumes and higher interest/depreciation costs
�� Adjusted profit of Rs796 mn was 7% below our estimates due to higher interest and
depreciation expenses during the quarter. Increase in working capital, increase in production at
Pantnagar plant and higher amortization of product development expenses led to a sharp
increase in interest and depreciation costs, in our view.
�� Net sales were in line with our estimates. Volumes declined by 35% qoq while product mix
deteriorated during the quarter. Truck volumes comprised 71.4% of total volumes in 1QFY12
versus 75.7% in 4QFY11. Bus volumes increased in the product mix comprising 27.6% of total
volumes in 1QFY12 versus 26.2% in 4QFY11. Truck segment is more profitable than the bus
segment. We believe factory/dealer inventory has increased further as production exceeded
sales in 1QFY12. The company had increased prices by 2% in April 2011 which also supported
average selling prices despite an adverse swing in product mix.
�� EBITDA margins came in at 9.4% (after adjusting for Rs94.6 mn reduction in other expenses as
the company modified the method of amortization of value of leasehold land from lower of 40
years and period of lease to period of lease). EBITDA margins were slightly ahead of our
estimates which we believe could be due to higher defence kit and spare part sales during the
quarter. EBITDA margins declined by 3.9% qoq and were 30 bps above our estimates.
We maintain our SELL rating on the stock
We maintain our SELL rating on the stock as we forecast a muted volume growth for the company
over the next two years. We expect earnings to decline by 11% yoy in FY2012E due to muted
volume growth and decline in EBITDA margins. Our target price of Rs52 (based on 11X FY2013E
EPS) remains unchanged and we do not see any triggers for stock performance.
In-line quarter operationally but high interest/depreciation costs impact earning
Adjusted net profits of Rs796 mn (-35% yoy, -73% qoq) were 7% below our estimates due
to sharp increase in interest and depreciation costs during the quarter. Revenues were in line
with our estimates but EBITDA was 3% above our estimates. EBITDA margins came in at
9.4% (after adjusting for Rs94.6 mn reduction in other expenses as the company modified
the method of amortization of value of leasehold land from lower of 40 years and period of
lease to period of lease).
Other key highlights of the results
�� Volumes declined by 35% qoq while product mix deteriorated during the quarter. Truck
volumes comprised 71.4% of total volumes versus 75.7% in 4QFY11. Bus volumes
increased in the product mix comprising 27.6% of total volumes in 1QFY12 versus 26.2%
in 4QFY11. Truck segment is more profitable than the bus segment.
�� We believe inventory has increased further during the quarter from 10,000 units in April
2011 as production exceeded sales during the quarter. The company produced 21,969
units in 1QFY12 and sold 19,277 units during the quarter. We expect 2QFY12E volumes
to also remain weak as the company corrects its inventory.
�� Average selling prices were flat during the quarter which we believe could be supported
by - 2% increase in prices in April 2011 and increase in defence kit and spare part sales
during the quarter.
�� We also believe production at Pantnagar plant has also declined sequentially during the
quarter which could have impacted profitability.
�� Staff cost and other expenses as a percentage of sales also increased during the quarter
due to negative operating leverage.
�� Interest costs increased by 18% qoq due to increase in working capital levels, in our view.
�� Depreciation costs also increased significantly due to increase in production at Pantnagar
plant and increase in product development expenses due to increase in research and
development costs on new U-trucks.
�� Tax rate was 24.2% in 1QFY12, lower than normal tax rate due to MAT credit.
No comments:
Post a Comment