Ashok Leyland share price up 9% post being profitable in Q4FY21

Ashok Leyland’s share price increased by 9% intraday on June 25 following the company’s profitability in Q4FY21. In the fourth quarter of FY21, the company had a standalone net profit of Rs 241.1 crore, compared to a loss of Rs 57.3 crore in the year-ago period.

Its standalone revenue increased by 82% to Rs 7,000.5 crore from Rs 3,838.5 crore a year before.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) was Rs 533.7 crore, with a margin of 7.6 percent, up from 4.7 percent (YoY)

Motilal Oswal reported gross margins fell 580 basis points year on year (-250 basis points quarter on quarter) to 23.1 percent (vs. forecasts of 24.2%), impacted by commodity cost increases.
Increased depreciation and interest expense resulted in recurring PBT of Rs 2.8 billion (expected Rs 3.2 billion vs. a loss of Rs 34 million in 4QFY20). PAT was adjusted to Rs 2.1 billion (expected Rs 2.6 billion vs. a loss of Rs 118 million in 4QFY20). For FY21, adjusted loss was Rs 3 billion (against profit of Rs 3.4 billion in FY20).

Net debt appears to be constant quarter on quarter, but has increased by approximately Rs 11.5 billion year on year to Rs 28.9 billion, the brokerage added.

The company is trading at 9.7 times FY23E EV/EBITDA and 3.8 times P/BV, it said, reiterating its “buy” rating.

“H2FY22E, we believe, may signal the commencement of a multi-year upcycle in M&HCV demand. However, we increase our FY22E/FY23E predictions by a factor of two.

11%/14% as the CV OEM’s margins outperform expectations despite cost challenges, “According to ICICI Securities.

On the basis of the better CV cycle outlook, the brokerage values the core company at 14x (unchanged) FY23E EV/EBITDA and adds Rs6/share (previously: Rs7/share) for investments to arrive at a SoTP-based target price of Rs 143. (earlier: Rs132). It has upgraded the stock from “hold” to “buy.”
Ashok Leyland was trading at Rs 127.30 on the BSE at 10.31 a.m., up Rs 9.10, or 7.7 percent.

On February 4, 2021, the share reached a 52-week high of Rs 138.85 and a 52-week low of Rs 45.25 on June 4, 2020. It is currently trading 8.32% below its 52-week high and 181.33% above its 52-week low.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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