Analysis of Ashok Leyland Dec 2018 Sales numbers

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Ashok Leyland 

  • Founded: 7th Sept 1948
  • Founder: Raghunandan Saran
  • Parent: Hinduja Group (51% stake)
  • HeadQuarters: Chennai, TamilNadu India

Key Financials of Ashok Leyland

Financials of Ashok Leyland Ltd:

ParticularsMarch 2018 (Cr)March 2017 (Cr)March 2016 (Cr)March 2015 (Cr)
Operations Revenue (Net)25,533.7919741.5818560.7713311.14
Profit/Loss (period)1552.691223.08389.60334.81
EPS (Rs)5.344.241.371.20
Equity Dividend Rate (%)2431569545

December 2018 Auto Numbers of Ashok Leyland

December 2018 Auto Numbers of Ashok Leyland YoY Comparision:

Segment vs UnitsDec 2018Dec 2017Growth (%)
Total Commercial Vehicles1549319251- 20
Medium & Heavy commercial vehicles1129515948-29
Light Commercial Vehicles41983303+27

PEERS of Ashok Leyland:

December 2018 Auto Sales Numbers are given in the table below

CompanyDec 2018 (% increase/decrease)
Maruti Suzuki -1.3
TVS Motors+6
Ford India- 18
Bajaj Auto+18
Honda Car+4
Tata Motors- 8
Royal Enfield- 13
Atul Auto+50%
Mahindra+1%
Mahindra Tractor-6%
  • The stock of Ashok Leyland Ltd performed really well in the last decade.
  • It is one of the best portfolio stock in recent times which rose from Rs 14 to Rs 168 in just four years.
  • The share traded in 75 to 100 range for an almost very long time before it jumped above 100 level in July 2017.
  • Since then we saw further buying in Ashok Leyland as brokerages firms started giving targets like 140, 180 and so on.
  • This stock has given more than 1100+ % returns in a 10-yr period, so it was obvious to see some profit booking after the bad December Auto Sales Number.
  • When the stock corrected from 168 to 140, no one could predict further fall as there was always a buying interest in this stock.
  • But the changing fundamental of the company has brought it below 100 today. The stock has corrected by almost 22% in the last 6 months.

Before we discuss why the stock is falling so fast, let’s discuss why it was in so much demand in last few years.

Positives about Investments in Ashok Leyland Ltd. shares

  • Ashok Leyland is the second largest commercial vehicle manufacturer in India.
  • It is the fourth largest manufacturers of buses in the world and 12th largest truck manufacturer in India.
  • The commercial vehicles business in India is growing with 18% growth rate

Defense Foray:

  • In August 2017 Ashok Leyland Defence Systems (ALDS), Russia’s Rosoboronexports and ELCOM group have signed a cooperation agreement in defense business to provide tracked vehicles to Indian Armed Forces.
  • Ashok Leyland holds 26% stake in ALDS.
  • ALDS has supplied over 60000 of its Stallion vehicles to Indian Army so far.

Competitive Advantage in Technology

  • Ashok Leyland is a pioneer in Technology and Services in Commercial Vehicles segment in India.
  • It was the first to introduce multi-axles trucks, full air brakes and innovations like rear engines and articulated buses.
  • His patented fuel injection system and iEGR technology were the decent technologies which made it Transporters favorite vehicle.
  • It is estimated that due to iGER (intelligent Exhaust Gas Recirculation) technology the number of electronic items and sensors in trucks has decreased so much that it is possible for Mechanics to easily maintain it.
  • Also, this engine doesn’t need AdBlue or Urea which saves a lot of costs (almost 20000 Rs per truck in fuel per 5000 km journey). It has power trasnmission of 400 Hp

ServiceMandi App

  • Ashok Leyland has a Mobile Application called Service Mandi.
  • It helps customer maintain data of all the Maintainance services of all their vehicles in one place.
  • If a truck breakdown and truck driver contacts Customer Care of Ashok Leyland through this app, Ashok Leyland Mechanic/ Automobile Engineers reach that spot within 4 hrs and solve that problem within 48 hrs maximum.

Innovation:

  • The Driver cabin is spacious, Gears work so good that Drivers can take longer roads without feeling much fatigue.
  • Transporters don’t have to pay penalties to RTOs thanks to low emission BS 4 Standard engines.
  • Ashok Leyland was the first to introduce India’s first indigenous made Electric Bus called Circuit in 2016.
  • The bus is Zero-Emission bus which can run 120 Km distance in the single charge.
  • Under the National Electric Mobility Plan of India, it was decided to add 20% hybrid vehicles by 2020. Ashok Leyland has good scope in this segment.
  • But Now Analysts are saying that Ashok Leyland will face many challenges ahead. One year target has been reduced to 115-125 from earlier 140-160.

Let’s see what are the various reasons for this shift in perception:

Negatives of Investment in Ashok Leyland Ltd. shares

  • In July, Government increased the permissible capacity of load carrying by 25% for heavy commercial vehicles which can reduce the demand of the additional trucks
  • On 13th November 2018 CEO and MD of Ashok Leyland Vinod Dasari announced that he will retire on 31st March 2019. Till the new Leadership gets announced stock will not perform now.
  • On 17th December, NCLT ordered Ashok Leyland amalgamation of its three arms wiz Developing, Manufacturing and Selling of LCVs up to 7.5 tonnes, Power Trains for LCVs, and their Spare parts in foreign countries.
  • Due to implementation of BS – VI emission standard on commercial vehicles, prices will rise upto 8% demand of new Trucks will increase which will affect current operating performance. Transformation needs some time. Management fear of bad 2021 and already started to avoid that possibility of tepid growth.

What to do in the Ashok Leyland Share now?

Recommended Action in Ashok Leyland Ltd Share

  • Ashok Leyland is trading below 100 level now.
  • After the bad December Auto Sales number, some more downside in share price can not be ruled out.
  • Stock has first major Support at 84 levels and second best support at 75.
  • On upper side Stock can go up to 115 where we can see high selling emerging as many investors are stuck in this stock.
  • One year target in this stock can be as low as 135 now.

(Disclaimer: Please note this post is for an Educational purpose. Consult your Financial Adviser before taking any investment decision. Stocksbaazigar is not responsible for any gain/loss of an Investor. Thank You.)


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