In the analyst call, the company said it expected the economy to recover in the second half of this financial year, leading to increased demand for commercial vehicles.
Commercial vehicle major Ashok Leyland sees sales of its medium and heavy commercial vehicles (M&HCV) improving from the second quarter of this financial year, the company told analysts in a conference call to discuss first quarter earnings.
The truck and bus manufacturer narrowed its first quarter loss to Rs 48 crore , compared to Rs 142 crore same period last year. Quarterly revenues rose 5 percent to Rs 2500 crore.
In the analyst call, the company said it expected the economy to recover in the second half of this financial year, leading to increased demand for commercial vehicles.
The company said the southern markets have seen a good recovery, and this trend is expected to continue because of the resumption of mining activity. It said tipper truckers and tractors were being ordered in anticipation of a revival in the economy.
The company's market share in the M&HCV segment rose to 25.5 percent in the June quarter, compared to 23.2 percent last year. Sales of its tipper trucks and tractors too saw an improvement, the company said.
Ashok Leyland said it will sell its loss-making arms and try to bolster its balance sheet. The subsidiaries include Albonair GMBH in Germany and Avia Ashok Leyland in Czech Republic.
Already, debt is down to Rs 4500 crore after the company raised Rs 666 crore through a qualified institutional placement (QIP) earlier this month. The debt to equity ratio now stands at 1.18:1.
However, the company is still trying to improve its working capital cycle. Operating working capital has risen to Rs 457 crore from Rs 244 crore, and the working capital cycle has risen to 12-13 days from 8 days earlier.
The company attributed the increase to higher pre-production on account of orders from JNNURM and from Sri Lanka.
It expects the working capital cycle to stay within 12-13 days band and not worsen further.
Other expenses in the June quarter were lower because of lower spend on R&D and sales & marketing. The company said it could trim expenses further.
Export volumes rose 8 percent and revenues increased 12 percent during the June quarter. The company said it is trying to further diversify exports to combat slowdown in the domestic business.
The company's operating margins improved 100-150 basis points during the June quarter, helped by a favourable product mix and price hikes of 1.0-1.5 percent.
The company said it deliberately cut down production of its light commercial vehicle Dost as there was excess inventory at the dealer level. Recently a new version of Dost and Partner has been launched and the company is hopeful that the LCV segment will see strong growth.
Ashok Leyland stock price
On July 28, 2014, at 14:13 hrs Ashok Leyland was quoting at Rs 33.05, down Rs 0.25, or 0.75 percent. The 52-week high of the share was Rs 39.00 and the 52-week low was Rs 11.82.
The company's trailing 12-month (TTM) EPS was at Rs 0.10 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 330.5. The latest book value of the company is Rs 15.69 per share. At current value, the price-to-book value of the company is 2.11.
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