ASHOKLEY - Ashok Leyland Ltd. Share Price

Management's outlook for Ashok Leyland emphasizes sustained growth driven by industry recovery, strategic investments, and operational efficiency. Key points include:

1. Industry Growth: MHCV demand rebounded in Q3 FY25, with positive momentum expected in Q4 and FY26, supported by government CAPEX, consumption demand, and infrastructure development. LCV and MHCV segments are projected to grow in FY26.

2. Market Share Goals: Targeting 35% MHCV market share (30.4% as of Q3 FY25) and 25% in LCV (18.5% currently), supported by new launches like the Saathi mini-truck and expanded touchpoints (1,000+ MHCV, 800+ LCV).

3. Financial Performance: Q3 EBITDA margin improved to 12.8% (vs. 11.6% in Q2 FY25) through cost leadership, material savings, and favorable product mix. Net cash position rose to Rs.958 crore (vs. net debt of Rs.1,747 crore YoY).

4. Exports & Non-CV Growth: Exports grew 33% YoY in Q3, targeting 15,000 units in FY25 and 25,000 medium-term. Non-CV segments (spares, engines) grew 14% and 3.5% YoY, respectively.

5. EV & Subsidiaries:

   • Switch Mobility: 1,800+ EV bus orders (including exports), expanding eLCV production. Focus on India amid UK market uncertainty.
   • OHM: 600+ e-buses operational.
   • Investments of Rs.500 crore in Switch and Rs.200 crore in Hinduja Leyland Finance to support growth.

6. Defense & Innovation: Strong defense pipeline (Rs.100 crore revenue in Q3) and new product launches (electric terminal tractor, 15m bus) targeting commercialization in 9"“12 months.

7. ESG Leadership: Ranked #1 globally in ESG (Sustainalytics), 68% renewable energy use, and social initiatives targeting 100,000+ students in FY26.

8. Union Budget Impact: FY26 budget's infrastructure and consumption focus expected to boost LCV, ICV, and MHCV demand. Management anticipates sustained mid-teen EBITDA margins and value unlocking from subsidiaries.

Question 1: "My first question is just around industry growth... So, I just want to understand how you are thinking about, is there any upside optionality or downside risk to this flat volume growth for FY25... And how that leads your view into what potential magnitude of growth you would expect in FY26 as things stand?"
Answer: Industry recovery in Q3 driven by festive demand and government CAPEX. Q4 shows positive growth signals. FY26 expected to sustain growth due to favorable economic factors, with MHCV and LCV segments projected to expand.

Question 2: "My second question is just around... margin upside... So, just trying to understand what the factors were in delivering some of this margin upside this quarter?"
Answer: Margin improvement due to favorable product mix (multi-axle/tipper growth), material cost savings, lower steel prices, and higher contributions from profitable segments like engines and spare parts.

Question 3: "Could you comment a little bit about... slowing bus growth... and sustainability of this export jump?"
Answer: Bus demand slowdown is temporary; strong order book (4,000 buses) ensures future growth. Exports target 15,000 units in FY25 (33% YoY growth), driven by market-specific strategies and investments in key regions (GCC, Africa).

Question 4: "How has defense done for us this quarter? Like any percentage revenue mix...?"
Answer: Defense revenue dropped to Rs.100 crore vs. Rs.150 crore in Q2 due to order delays but has a robust pipeline (10,000"“12,000 truck replacements expected over 3"“4 years).

Question 5: "The net cash is post this Rs. 700 crore investment...?"
Answer: Net cash position of Rs.958 crore is pre-investment. Rs. 500 crore allocated to Switch (Optare) for CAPEX/debt reduction and Rs. 200 crore to Hinduja Leyland Finance for capital adequacy.

Question 6: "How do you see the near-term non-vehicle revenue piece...?"
Answer: Non-CV segments (spares, defense, engines) contribute ~20% of revenue. Defense pipeline strong despite quarterly volatility; focus on diversifying cyclical exposure.

Question 7: "Are you looking at the industry level to grow YoY in Q4...?"
Answer: Q4 industry growth expected positive (January already positive). FY26 growth anticipated across CV segments, supported by consumption demand and infrastructure spending.

Question 8: "What was the net price realization increase in 3Q...?"
Answer: Net pricing remained flat sequentially; marginal gains offset by discounts. Tipper segment recovery and premiumization to aid future margin resilience.

Question 9: "Are there any cases of NPAs going up... freight rates?"
Answer: No significant NPA concerns. Freight rates improving gradually; utilization stable. Optare (Switch UK) faces challenges due to weak EV demand, leading to cost rationalization.

Question 10: "Are margins of 13% sustainable?"
Answer: Sustainable via cost control, favorable mix (higher non-CV contributions), and lower breakeven volumes. Focus on premium products and operational efficiency to maintain margins.

Question 11: "Government is planning to mandate AC cabins... pre-sales in Q1 FY26?"
Answer: AC cabin mandate (effective June 2025) has minimal cost impact; no significant pre-buying expected due to marginal price adjustment.

Question 12: "Replacement demand may not be as fast...?"
Answer: Replacement demand rising gradually amid higher vehicle aging. Shift from individual buyers to fleets noted, with loan tenures elongating due to cost hikes.