Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ashok Leyland Ltd (BOM:500477, Financial) achieved record financial performance in Q1 FY25, with total commercial volumes hitting an all-time high of 42,892 units, up 6% compared to the same period last year.
- The company's EBITDA grew by 11% to INR 911 crores, and PBT increased by 13% to INR 701 crores, marking the highest figures for Q1 so far.
- Ashok Leyland Ltd (BOM:500477) retained its market share in the MHCV segment at roughly 31%, with MHCV volumes growing in line with the industry.
- The company saw a 5% growth in CV export volumes and a 4% increase in domestic LCV volumes, enhancing its LCV market share.
- Ashok Leyland Ltd (BOM:500477) is optimistic about future growth, with a strong product pipeline and plans for multiple new product launches in both domestic and international markets.
Negative Points
- The LCV industry remained flattish on a year-on-year basis, indicating limited growth in this segment.
- Power solution volumes were lower by around 20% compared to last year due to pre-buying in Q1 of the previous year.
- Other expenses increased due to a one-time expense for the development of centers of excellence for battery packs, electric drive units, and software-defined vehicles.
- The company faces challenges in the tipper segment, which was negatively impacted by stalled infrastructure projects due to elections.
- There is a significant aging of the fleet in the CV industry, with the average age of vehicles being around 10 to 11 years, which could impact replacement demand.
Q & A Highlights
Q: Can you provide an update on the LCV product launch pipeline and the timeline for entering the zero to 2-tonne category?
A: We have six LCV launches planned for this year, with two already launched in Q1. Four more will be launched in the coming quarters. The sub-2-tonne segment is a medium-term project and won't be launched this year. We are also focusing on new products in the bus segment to increase our market share.
Q: What is the current age of the fleet in the market, and how do you see replacement demand in the CV industry?
A: The average fleet age is around 10 to 11 years, compared to the long-term average of seven to eight years. We expect significant replacement demand over the next two to three years, which should positively impact industry growth.
Q: Can you clarify the HLFL potential reverse merger into NXTDIGITAL?
A: The housing finance entity is a 100% subsidiary of Leyland Finance, which is being reverse merged into NXTDIGITAL. The new entity will hold the housing finance business as well.
Q: What are your growth expectations for MHCVs and LCVs this year, and how is the pricing environment?
A: Despite initial conservative forecasts, Q1 MHCV growth of 10% has been positive. We expect the industry to be flattish at worst, with potential growth. We remain committed to not discounting our products to gain market share, focusing instead on product strength and customer experience.
Q: Can you elaborate on the viability and customer adoption of electric LCVs and the roadmap for PLI approval?
A: The adoption of electric LCVs is currently slow, mainly driven by B2B sales to e-commerce and logistics companies. We are meeting all PLI requirements and will be ready for FAME-III as soon as it is announced. The PLI scheme is a medium-term program, while FAME-III is more immediate.
Q: What is the outlook for electric buses?
A: We have a strong order book for electric buses, including 950 buses for Delhi and 300-plus for Bangalore. We are seeing more states shifting towards electric buses, and we expect this trend to continue.
Q: Can you quantify the onetime expense related to battery pack and software development?
A: These expenses are included in the standalone financials and are related to advanced engineering for battery packs, electric drive units, and software-defined vehicles. These are one-off expenses and not recurring.
Q: What are the growth prospects for defense and spare parts businesses?
A: Defense revenues have tripled compared to the same period last year, with a record high of over 1,000 vehicles sold in Q1. Spare parts revenue has increased by about 12.5%. We aim to double the defense business again in the next 2 to 2.5 years.
Q: What is the expected CapEx and investment for FY25?
A: We estimate CapEx to be around INR 750 crores. Investments in associate companies like Switch may range from INR 500 crores to INR 750 crores, but we will update as needed.
Q: How do you see the recovery of the cargo segment and the growth of sub-segments like ILCV and heavy commercial vehicles?
A: The tipper segment was temporarily affected by elections but is expected to recover from August onwards. Tractor-trailers and ICVs are growing well, while multi-axle products may see some degrowth as demand shifts to tractor-trailers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
