“We anticipate sustaining double-digit Ebitda margins this year. Through a combination of cost-saving measures and the successful performance of our AVTR range of trucks, we have achieved this and have been able to price our products competitively,” said Dheeraj Hinduja, the executive chairman of Ashok Leyland, in an interview with ET.
Despite a strong demand for medium and heavy commercial vehicles (MHCVs), the truck and bus manufacturer based in Chennai reported earnings for the June quarter that exceeded expectations. Fueled by a reduced tax expense, the net profit surged to ₹576 crore from ₹68 crore the previous year, while revenue increased to ₹8,188.9 crore from ₹7,223 crore.
Compared to the previous year, the operating profit margin (Ebitda margin) grew by 5.59 percentage points, reaching 10%.
The first quarter of FY24 saw the percentage of sales revenue spent on raw materials decline to 73.70% from 79.28%.
While sales volume increased by 4.2%, the net realization per vehicle rose by 8.8% to ₹19.81 lakh. This boost was attributed to a more favorable product mix and price adjustments. In the June quarter, Ashok Leyland achieved an operating profit of ₹1.98 lakh per unit, marking a 1.5 times improvement compared to the same quarter last year. The company aims to achieve mid-teen Ebitda margins in the medium term by increasing its market share in the MHCV segment, enhancing pricing, and lowering raw material costs through value engineering.
Jay Kale from Elara Capital mentioned that historically, Ashok Leyland’s full-year margins have exceeded those of Q1, considering that the April-June quarter typically experiences lower volumes. If the current trend of reduced discounting continues, he expects the full-year margin to surpass 10%.
Ashok Leyland’s aggressive cost-saving approach, implemented across manufacturing plants, sourcing, and other operations, has contributed to achieving a double-digit margin and will support future growth, according to Hinduja. He stated, “While we may not have control over pricing, we can control costs.”
Ashok Leyland is the largest exporter of MHCVs from India and plans to expand exports by increasing its presence in Africa. The company recently appointed new distributors in Africa, which will result in a significant increase in volumes from the region, according to Hinduja.