*Ashok Leyland Q2FY20 Concall Update*
(Nirmal Bang Retail Research)
*Demand decline has bottomed out, but recovery to take time*
• Volumes for the MHCV Industry in Q2FY20 declined by 53% vs a decline of 17% in Q1FY20.
• Co MHCV Volumes declined by 56% in Q2FY20 vs a decline of 13% in Q1FY20.
• Thus market share was stable YoY in H1FY20 at 32.6%. Market share increased in Q1 and reduced in Q2 as the co decided to reduce inventory.
• For the co, inventories were at 18,200 as on Sep end and at 13,200 as on Oct end.
• Discounting per truck was at ~Rs. 5,25,000 vs ~Rs. 4,25,000 YoY & QoQ.
• Negative OPLEV & discounting levels kept increasing which resulted in a drop in EBITDA margins to 5.8% vs QoQ 9.4%, YoY 10.6%.
*Positives going forward*
• Co expects prebuying to drive partial recovery in near term.
• Inventories decline has peaked out for the industry and realisations are likely to firm up.
• Freight rates have also stabilized and with a possible recovery in economy, they could move up in future.
Share is trading at P/E of 16.8x TTM EPS & 1x TTM EV/Sales