Ashok Leyland Q3 Review - Margin Recovery Falls Short Of Expectations: ICICI Securities
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ICICI Securities Report
Ashok Leyland Ltd.’s operating performance in Q3 FY21 was below consensus estimates as Ebitda margin came in at 5.3%.
Gross margins eroded approximately 321 basis points QoQ to 25.6% due to high input cost pressures.
Key medium-term industry monitorables -
- economic activity and growth trends in infrastructure-led demand;
- used vehicle demand/pricing trends; and
- contours of scrappage policy.
We estimate volume rebound at ~35% compound annual growth rate FY21E-FY23E, which we reckon will raise asset efficiencies, margins for the company leading to healthy free cash flow generation (~Rs 30 billion cumulative FCF in FY22E/23E) assuming subdued capex intensity.
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