Ashok Leyland

Ashok Leyland achieved its highest ever Q3 volumes, revenue, EBITDA, EBITDA margin, PBT, and PAT. Revenue for the quarter stood at INR 11,534 crores, a 21.7% year-on-year increase. EBITDA grew by 26.7% to INR 1,535 crores, with the EBITDA margin expanding by 50 basis points to 13.3%. The company's domestic MHCV volume grew 23.4% Y-o-Y, outperforming the industry and contributing to a YTD market share gain of 60 basis points, reaching 30.9%.

The GST reset has provided a much-needed trigger for a fresh CV replacement cycle, leading to strong volume growth. Initially driven by retail buyers in November and December, the momentum shifted to include bulk buyers in January, who are now projecting purchases for 3-4 quarters. Management noted that the aging fleet, which has increased from 7-7.5 years to 10-10.5 years, is unsustainable, and the current environment, coupled with rising freight demand and rates, is conducive for a sustained replacement cycle.

Gross margins in Q3 were impacted by an unfavorable product mix and escalations in nonferrous commodity prices (PGM, copper, aluminium). Material cost as a percentage of revenue increased to 72.2%, up 70 basis points Y-o-Y and 100 basis points sequentially. The initial post-GST growth was skewed towards ICV and LCV segments, with ICV contribution reaching ~30% compared to a historical 22-24%. Management expects this mix to normalize as heavy-duty bulk buyers increase their participation, and is implementing price increases and discount reductions to recover commodity costs.

Ashok Leyland's non-CV businesses demonstrated robust growth, with Aftermarket revenues up 10% Y-o-Y, Power Solutions business up 45% Y-o-Y, and Defense business up 84% Y-o-Y in Q3. The share of IO business in overall revenue increased from 6% to 8%, while Defense and Power Solutions' share also grew. The company is expanding its network in international markets, adding 4 new territories, and signed an MOU with PT Pindad of Indonesia for joint development of electric buses and defense vehicles.

The company reported a net cash position of INR 2,619 crores at the end of Q3, an increase of over INR 1,660 crores Y-o-Y. Capex for the quarter was INR 186 crores, with a cumulative 9-month spend of INR 844 crores. Management indicated no major capacity expansion capex for the next 2-3 years, with only minor investments of INR 50-100 crores planned for niche areas. Switch India is progressing towards becoming free cash flow positive by FY '27, and OHM, the E-MaaS subsidiary, is operating over 1,400 electric buses, with INR 300 crores already invested and another INR 300 crores earmarked for future infusion.

Ashok Leyland launched new heavy-duty trucks, HIPPO tractors, and TAURUS tippers with industry-best power and torque (320 HP and 360 HP). In the LCV segment, a new 4.1-ton Bada Dost was introduced, and the company plans to enter the bi-fuel segment soon. The new Lucknow plant and ramp-up of other bus plants are expected to increase bus body building capacity to 20,000 units per year. The company is also focusing on increasing LCV segment coverage from 50% to 80% and aims to achieve 30% market share in non-South regions, up from 15-18% previously.