Release Date: May 24, 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 revenue, EBITDA margins, and profits in FY24.
- The company's EBITDA grew by 57% to INR4,607 crores, and PAT reached an all-time high of INR2,618 crores.
- Ashok Leyland Ltd (BOM:500477) regained the number one position in MHCV buses with significant market share gains.
- The company has a strong balance sheet with net debt close to zero at the end of FY24.
- Ashok Leyland Ltd (BOM:500477) is optimistic about future growth, with plans for six new product launches in the LCV segment in FY25.
Negative Points
- The European market, particularly the UK, is facing challenges, impacting Switch Mobility's performance.
- Despite the overall positive outlook, the company acknowledges potential external pressures and market uncertainties.
- The aging fleet replacement demand is taking longer to materialize, particularly among smaller fleet operators.
- The company faces the challenge of ramping up production and sourcing capabilities to meet the growing order book for electric buses.
- There is a need for continued investment in Switch Mobility and OHM, which could impact short-term financials.
Q & A Highlights
Q: Can you provide an outlook for the M&HCV and LCV segments for FY25?
A: Shenu Agarwal, CEO & MD: The M&HCV industry grew by 3-4% in FY24, with a stronger growth of 8-9% in the first seven to eight months. Despite a high base in the last quarter, the industry grew by 10% in April. We remain optimistic about both M&HCV and LCV segments for FY25, expecting continued positive momentum.
Q: How has the mix of vehicles within the M&HCV segment evolved over the past few years?
A: Shenu Agarwal, CEO & MD: There is a trend towards higher-ton vehicles, driven by the aging fleet and replacement demand. Around 70% of vehicles are from the BS4 era, and as they get replaced, they will be replaced by higher-ton vehicles. This trend is expected to continue.
Q: What is the expected tax rate for FY25?
A: Gopal Mahadevan, CFO: We are working towards achieving a lower tax rate for FY25, depending on meeting certain profit thresholds. We are optimistic about moving to a lower tax bracket next year.
Q: Can you provide insights into the industry outlook and potential growth rates for FY25?
A: Shenu Agarwal, CEO & MD: While it's early to give specific numbers, the industry showed strong growth in April, and the pulse on the ground remains positive. We expect a good year for the industry, with potential high single-digit to double-digit growth.
Q: What are the CapEx and investment plans for FY25?
A: Shenu Agarwal, CEO & MD: Our CapEx for FY25 is expected to be between INR500 crores to INR700 crores. Investment requirements, particularly for Switch, are being evaluated, but we do not foresee significant needs in the immediate term.
Q: How has the cost optimization program impacted margins, and what are the future plans?
A: Shenu Agarwal, CEO & MD: Cost optimization is an ongoing journey. We achieved significant cost savings in FY24 and aim for even better results in FY25. We focus on both fixed and variable cost reductions, leveraging technology and productivity improvements.
Q: What is the status of Switch Mobility and its profitability?
A: Shenu Agarwal, CEO & MD: Switch India has turned EBITDA positive in Q4. We are focusing on ramping up production and sourcing capabilities to meet the growing order book. Future tenders will be approached on a profitable basis.
Q: Can you provide an update on Hinduja Leyland Finance and its financial metrics?
A: Gopal Mahadevan, CFO: The reverse merger process is back on track, and we expect value realization for both Hinduja Leyland Finance and Ashok Leyland. The AUM is around INR50,000 crores, with GNPA at 4.5% and NNPA at 2.3%.
Q: What is the outlook for the defense segment in FY25?
A: Shenu Agarwal, CEO & MD: We almost reached the INR1,000 crore mark in FY24 and have a strong order pipeline for the next couple of years. We are optimistic about achieving higher targets in the defense segment.
Q: How is the dedicated freight corridor (DFC) impacting road freight and truck demand?
A: Shenu Agarwal, CEO & MD: The DFC has not yet fully played out, and there are fundamental issues in the model. We do not expect a significant impact on road freight and truck demand in the short term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
