In s titu tio n a l E q u itie s

Ashok Leyland
14 August 2020

Reuters: ASOK.NS; Bloomberg: AL IN

Preparing to reap fruits when the recovery starts ACCUMULATE
Ashok Leyland (AL) reported a loss of Rs3.87bn, higher than NBIE estimate of Rs3.3bn. The miss was
mainly due to weak operating performance. AL reported an exceptional loss of Rs17mn during the Sector: Automobiles
quarter towards liabilities of discontinued products from the LCV division. Net revenue of Rs6.5bn,
down 88.5% YoY, was ahead of our estimate. Gross margin improved by 580bps YoY and 700bps QoQ CMP: Rs61.75
to 35.9% on account of favorable segment mix (higher share of spares and other non-CV segments),
lower discounts, benign commodity costs and cost reduction efforts. AL took BS-VI related price hike of Target Price: Rs63.60
15-20% on MHCVs and 15-18% on LCVs on a blended basis. However, negative operating leverage due
to low volume affected the EBITDA. EBITDA loss stood at Rs3.3bn as against a positive EBITDA of Upside: 3%
Rs5.4bn in 1QFY20 and was higher than our expected loss of Rs2.5bn. Capex on all the major projects
(Modular platform, Phoenix, BS-VI) has been completed and capex for FY21 is expected at ~Rs5-6bn
Anish Rankawat
mainly towards maintenance and some small projects. Investment in subsidiaries other than Hinduja Research Analyst
Leyland Finance (HLFL) will be ~Rs1.5bn in FY21. AL will not invest in HLFL and it is looking for a anish.rankawat@nirmalbang.com
1QFY21 Result Update

strategic PE investor. ICDs worth ~Rs1bn were repaid in August and current outstanding ICDs placed +91-22-6273 8172
with group companies stand at Rs4bn. The management believes that the CV industry has bottomed out
and will witness good pent-up demand going forward. It expects better 2HFY21 as the industry moves Ronak Mehta
towards normalcy. Within M&HCVs, segments like ICV and Tippers are showing good traction and
demand from the cement sector is expected to pick up going forward. Current industry fleet utilization
Research Associate
is estimated at ~50-55% and is expected to see a gradual recovery, led by economic recovery. AL is ronak.mehta@nirmalbang.com
currently operating at about 35% capacity utilization (produced over 10,000 BS-VI vehicles till now) and +91 22 6273 8176
expects to ramp it up further going forward. The recently launched AVTR platform has received
excellent feedback and is seeing good interest from fleet owners. The recent announcement on the Key Data
Defence sector is directionally positive and will be beneficial for defence suppliers like AL. On the Current Shares O/S (mn) 2,935.5
Passenger Bus segment, the management believes that social distancing is expected to put pressure Mkt Cap (Rsbn/US$bn) 179.4/2.4
on existing capacity of public transport and will drive demand for buses going forward. There has been
a delay from state governments in floating tenders for new buses but the management expects some 52 Wk H / L (Rs) 88/34
tenders to open in 2Q and 3Q. The management indicated that AL will participate in those tenders. AL’s Daily Vol. (3M NSE Avg.) 44,851,090
new LCV platform ‘Phoenix’ will be launched within the next 60-90 days and is expected to increase the
addressable LCV market. The management is confident of market share gains in both ICVs and LCVs on Price Performance (%)
the back of very good interest from fleet owners. Going forward, reduced manufacturing complexity, 1M 6M 1 Yr
lower inventory and new product development costs on this new platform are expected to aid the Ashok Leyland 20.3 (25.1) (0.7)
margins. The cost reduction program (K54), which helped save costs of ~Rs5.4bn in FY20, will continue
Nifty Index 4.6 (7.2) 3.4
further in FY21. We expect a revival in the CV cycle only from FY22, led by economic recovery and a
favorable base. Hence, we have maintained our volume forecast of 3.1% CAGR over FY20-22E. We have Source: Bloomberg
raised our revenue/EBITDA/PAT estimates and expect the same to grow at CAGR of 13.1%/35.9%/66.7%
over FY20-22E, driven by higher BS-VI cost increase and better margin outlook. We raise our target FY2019-20 Annual report
price to Rs63.6 based on target PE multiple of 17x. We maintain our rating as ACCUMULATE.
Y/E March (Rsmn) 1QFY20 3QFY20 1QFY21 YoY (%) QoQ (%) YTDFY20 YTDFY21 YoY (%)
Volume (units) 39,608 25,504 3,814 (90.4) (85.0) 39,608 3,814 (90.4)
Avg. realisation (Rs) 1,435,028 1,505,042 1,706,529 18.9 13.4 1,435,028 1,706,529 18.9
Net sales 56,839 38,385 6,509 (88.5) (83.0) 56,839 6,509 (88.5)
COGS 39,737 27,290 4,175 (89.5) (84.7) 39,737 4,175 (89.5)
% of sales 69.9 71.1 64.1 (5.8) (7.0) 69.9 64.1 (5.8)
Gross margin % 30.1 28.9 35.9 580bps 700bps 30.1 35.9 580bps
Employee costs 5,004 4,097 3,542 (29.2) (13.6) 5,004 3,542 (29.2)
% of sales 8.8 10.7 54.4 45.6 43.7 8.8 54.4 45.6
Other expenses 6,728 5,168 2,125 (68.4) (58.9) 6,728 2,125 (68.4)
% of sales 11.8 13.5 32.6 20.8 19.2 11.8 32.6 20.8
EBITDA 5,370 1,830 (3,332) (162.1) (282.1) 5,370 (3,332) (162.1)
EBITDA margin % 9.4 4.8 (51.2) n.a. n.a. 9.4 (51.2) n.a.
Depreciation 1,646 1,877 1,637 (0.6) (12.8) 1,646 1,637 (0.6)
Interest expenses 126 331 768 512.3 132.1 126 768 512.3
Other income 211 344 256 21.6 (25.6) 211 256 21.6
Exceptional exp/(inc) 201 687 17 - - 201 17 -
PBT 3,607 (721) (5,498) (252.4) 662.6 3,607 (5,498) (252.4)
Tax 1,305 (148) (1,610) (223.4) 989.3 1,305 (1,610) (223.4)
Effective tax rate % 36.2 20.5 29.3 - - 36.2 29.3 -
Reported PAT 2,302 (573) (3,888) (268.9) 578.3 2,302 (3,888) (268.9)
Adj PAT 2,503 114 (3,871) (254.6) (3,492.9) 2,503 (3,888) (255.3)
Adj PAT margin % 4.4 0.3 (59.5) n.a. n.a. 4.4 (59.7) n.a.
EPS 0.9 0.0 (1.3) (254.6) (3,492.9) 0.9 (1.3) (254.6)
Source: Company, Nirmal Bang Institutional Equities Research
 In s titu tio n a l E q u itie s

Exhibit 1: Financial summary

Y/E March (Rsmn) FY18 FY19 FY20 FY21E FY22E
Volume (units) 174,851 197,366 125,240 101,240 133,127
YoY growth (%) 20.5 12.9 (36.5) (19.2) 31.5
Net sales 262,479 290,550 174,675 166,642 223,421
YoY growth (%) 31.1 10.7 (39.9) (4.6) 34.1
EBITDA 27,390 31,357 11,737 9,332 21,672
EBITDA margin (%) 10.4 10.8 6.7 5.6 9.7
Adjusted PAT 15,748 20,407 3,953 1,026 10,981
EPS 5.4 7.0 1.3 0.3 3.7
YoY change (%) 35.1 29.6 (80.6) (74.1) 970.7
RoCE (%) 29.8 29.2 5.9 2.6 13.4
RoE (%) 22.0 24.5 5.4 1.4 13.6
P/E (x) 11.5 8.9 45.9 176.7 16.5
EV/Sales (x) 0.4 0.5 1.0 1.0 0.7
EV/EBITDA (x) 4.3 4.6 14.6 18.6 7.4
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 2: Change in our estimates

Y/E March New estimate Old estimate Change (%)
(Rsmn) FY21E FY22E FY21E FY22E FY21E FY22E
Volume 101,240 133,127 101,240 133,127 - -
Net sales 166,642 223,421 160,933 215,321 3.5 3.8
EBITDA 9,332 21,672 9,817 18,948 (4.9) 14.4
EBITDA margin (%) 5.6 9.7 6.1 8.8 (50bps) 90bps
Adj. PAT 1,026 10,981 1,508 8,919 (32.0) 23.1
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 3: Deviation of consensus estimates from actual performance

Actual Our estimate Deviation
(Rsmn)
1QFY21 1QFY21 (%)
Net sales 6,509 5,583 16.6
EBITDA (3,332) (2,568) 29.8
EBITDA (%) (51.2) (46.0) (520bps)
Adj. PAT (3,871) (3,308) 17.0
Source: Nirmal Bang Institutional Equities Research

Key takeaways from the conference call:

 Demand outlook: In 1QFY21, total M&HCV industry volume declined by ~94%. This was an exceptional
quarter with April and May almost a washout. Chennai was particularly affected by the Covid-19 lockdown,
which affected the company’s operations. However, demand has seen a gradual recovery in July and
August. AL is currently operating at about 35% capacity utilization and expects to ramp it up further going
forward (produced over 10,000 BS-VI vehicles till now). Within M&HCVs, segments like ICV and Tippers
are showing good traction and demand from the cement sector is expeceted to pick up going forward. AL
has received excellent feedback from fleet owners and drivers on the recently launched ‘AVTR’ platform
and is seeing very strong interest from fleet owners. Based on the AL’s estimate, current industry fleet
utilization is ~50-55%. The management expects good pent-up demand going forward and sees much
better volume in 3QFY21 and 4QFY21 as the economy will move towards normalcy. On the Passenger Bus
segment, the management believes that social distancing is expected to put pressure on the existing
capacity of public transport and will drive demand for buses going forward. There has been a delay from
state governments in floating tenders for new buses but the management expects some tenders to open in
2Q and 3Q. The management indicated that AL will participate in those tenders. On the LCV segment, the
management stated that AL is very well positioned in SCV and LCVs market as it has gained market share
over the last few years. AL will focus on increasing the addressable market by filling the production gap and
the launch of the Phoenix platform within the next 60-90 days will further strengthen its market position and

2 Ashok Leyland
 In s titu tio n a l E q u itie s

help it to gain market share. The management stated that the Phoenix platform has received positive
feedback and there is a lot of exceitment. Overall, the management believes that the CV industry has
bottomed out and will see gradual recovery going forward. AL is also targeting export growth over the next
5 years to achieve its vision to be among the top 10 CV players globally and is looking to enter South East
Asian markets along with addressing the requirements of its exisiting makets like Middle-East and SAARC.
The management stated that the recent announcement on Defence sector is directionally positive and will
be beneficial for defence suppliers like AL. AL is implementing some structural measures, including cost
reduction; digital and analytics integration; focus on productivity, cash flows and new product development,
which the management believes will make AL more resilient.

 Volume & market share: M&HCV industry volume declined by ~94% in 1QFY21, while the company’s
volume declined by ~97%. It was an exceptional quarter and hence market share is not meaningful. Going
forward, with the launch of the AVTR platform, AL is focusing on value selling as TCO will be lower for
customers and also AL’s cost of components will reduce significantly. The management is confident of
gaining market share on the back of the AVTR platform without resorting to higher discount. The Phonenix
platform is also expected to increase the addressable LCV market and lead to market share gains.
 ICDs: AL placed ICDs worth Rs5,000mn with the group companies of its Parent – Hinduja group in
4QFY20. The management stated that these ICDs are short term in nature and part of efficient treasury
management operations as yields will be higher than short term bank deposits (yield ranges 9.5-10.5%). Of
these, Rs1000mn of ICDs were repaid in August and current outstanding balance stands at Rs4,000mn.
 Margins & cost reduction program: AL’s gross margin improved by 580bps YoY and 700bps QoQ to
35.9% on account of favourable segment mix, lower discounts, benign commodity costs and cost reduction
efforts. Share of Spares (25%) and other non CV segment (34%) increased during the quarter. Revenue
from Spares continues to remain strong (~1,000-1,100mn over the last 2 months), which is expected to aid
the margins. AL took a BS-VI related price hike of 15-20% on ICVs and 15-18% on LCVs on a blended
basis. But, negative operating leverage due to low volume affected the EBITDA. The management stated
that the company achieved cost saving of ~Rs5,400mn in FY20 on account of efficient cost management
across all the functions. It has launched ‘Project Reset’ to further drive cost efficiency. The ‘AVTR’ platform
is expected to reduce manufacturing complexity, lower inventory and new product development costs and
improve productivity, making operations more efficient. The management stated that margins will be higher
on this platform.
 New platforms: AL’s new LCV platform ‘Phoenix’ will be launched within the next 60-90 days. All the
products on this platform are ready and AL is just waiting for the right time to launch them. The
management is very confident of improving its position in the LCV market along with market share gains on
the back of the Phoenix platform. AL launched its modular platform ‘AVTR’ during 1QFY21 and has
received excellent feedback and is seeing good interest from fleet owners.
 Exports: The company is redrawing its exports strategy and has a much larger product portfolio to offer to
its customers globally. AL is strengthening its dealerships in the Middle-east, Africa and SAARC regions
and is looking to enter South East Asian markets. The management believes that the AVTR platform will
give AL an edge globally with its potential to switch between right-hand-drive and left-hand-drive. It will
provide flexibility to export the products globally without incurring any major cost to switchover to left-hand-
drive. The management stated that to achieve its vision to be among the top 10 CV players globally, it will
focus on the exports markets. It will be a 5 year strategy.
 Capex & Investments: Most of its capex towards modular business program, phoenix project and BS-VI
has come to an end. Capex for FY21 is expected at ~Rs5,000-6,000mn towards some small projects and
maintenance. There will be no investment in Hinduja Leyland Finance based on current assessment.
Investment in other subsidiaries will be ~Rs1,500mn in FY21.
 Debt: AL raised additional debt during 1QFY21 and its current net debt stands at ~Rs42.5bn. Debt was
raised mainly to manage the working capital requirements and the management expects debt to fall
signficiantly by the end of the year.
 Hinduja Leyland Finance (HLFL): For 1QFY21, net interest income was almost the same as last year and
PAT was ~85% of last year. After making a Rs750mn covid-19 related provisions in 4QFY21, HLFL made
additional provision of Rs150mn during the quarter. Net loans under moratorium stood at 40% vs. 75%
earlier. AUM stood at ~Rs10,550mn as at June end. LTV ratios have declined as the industry has become
more stringent in disburising new loans.

3 Ashok Leyland
 In s titu tio n a l E q u itie s

Story in Charts
Exhibit 4: Total Volume & YoY growth (%) Exhibit 5: Segment mix (%)
70,000 42.1 47.9 60 100%
22.5 23.3 26.8 40 90% 23.4 23.4 24.4 26.0
60,000 30.3 27.3 26.1 31.9 32.5 33.5
80% 41.9 41.9
50,000 1.3 20
(6.2) (6.0) 70% 12.3 9.6 10.1 9.1 10.2
(8.6) 13.0
- 16.8 8.2 73.2
40,000 60% 13.2
(28.7) 23.8
(20) 50% 17.5
30,000 (44.3) 22.3
(57.1) (40) 40%
30% 64.3 67.0 65.6 64.7 63.8
20,000 59.8 59.9 54.2
(60) 52.9 3.2
20% 40.6 42.7
10,000 (90.4) (80) 35.8
10% 23.5
- (100) 0%
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21
Total Volume (Units) YoY growth (%; RHS) M&HCV Trucks M&HCV Buses LCV

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 6: M&HCV Trucks - Domestic volume & YoY growth (%) Exhibit 7: M&HCV Trucks - Domestic market share (%)
40,000 65.4 80 45
54.1
35.5 60 40 36.3
35,000 34.4 34.3 33.1 32.9 34.7 34.3 33.0
19.7 40 35 31.2
30,000 28.8 27.7 27.6
(1.6) (6.8) 20 30
25,000 (12.8) 24.9
(23.0) -
25
20,000 (20) 17.0
20
15,000 (64.9)(57.6)(71.2) (40)
(60) 15
10,000 (96.6) (80) 10
5,000 (100) 5
- (120) -
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

M&HCV Trucks (Units) YoY growth (%; RHS) M&HCV Trucks - Market share (%)

Source: Company, Nirmal Bang Institutional Equities Research Source: CRISIL, Nirmal Bang Institutional Equities Research

Exhibit 8: M&HCV Buses - Domestic volume & YoY growth (%) Exhibit 9: M&HCV Buses - Domestic market share (%)
6,000 150 60
50.7
91.7
5,000 100 50 42.9 44.4 43.7
42.1 41.1
39.8 39.0 40.1 39.5
34.6 36.4 37.4
4,000 16.4 6.1 18.3 50 40
0.5 (9.4)
(10.8) (10.8)
3,000 (26.9)(28.7)(25.8) - 30

2,000 (50) 20
(99.7)
1,000 (100) 10 5.5

- (150) -
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

M&HCV Buses (Units) YoY growth (%; RHS) M&HCV Buses - Market share (%)

Source: CRISIL, Nirmal Bang Institutional Equities Research Source: CRISIL, Nirmal Bang Institutional Equities Research

4 Ashok Leyland
 In s titu tio n a l E q u itie s

Exhibit 10: LCV - Domestic volume & YoY growth (%) Exhibit 11: LCV - Domestic market share (%)
16,000 60.1 80 12
43.6 9.5 9.8 9.9
14,000 41.5 60 9.2
34.1 30.2 10 8.5 8.5 8.7 8.9
22.2 16.3 40 8.1 8.3 8.0 8.2
12,000 7.6
7.0 12.4 20 8
10,000
(12.6) (8.1) -
8,000 6
(20)
6,000 (45.9)
(40) 4
4,000 (78.8) (60)
2
2,000 (80)
- (100) -
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21
LCV (Units) YoY growth (%; RHS) LCV - Market share (%)

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 12: Avg selling price (ASP) & YoY growth (%) Exhibit 13: Revenue & YoY growth (%)
1,800 25 100,000 57.5 80
18.9 47.5
1,600 20 90,000 60
30.8 32.6
1,400 80,000 25.8 40
10.9 15
1,200 8.9 7.5 70,000 20
6.7 10 (0.5) 0.8
60,000 (11.1) (9.1)
1,000 -
1.3 5 50,000
800 (0.3) (0.7) (0.5) (36.5) (20)
(3.3) - 40,000 (48.4)
600 (5.2) (56.6) (40)
(7.3) 30,000
400 (5) (60)
(11.0) 20,000 (88.5)
200 (10) 10,000 (80)
- (15) - (100)
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

ASP (Rs '000 / Vehicle) YoY growth (%; RHS) Revenue (Rs mn) YoY growth (%; RHS)

Source: Company, Nirmal Bang Institutional Equities Research Source: CRISIL, Nirmal Bang Institutional Equities Research

Exhibit 14: Gross margin & EBITDA margin trend Exhibit 15: Adj PAT & YoY growth (%)
50 35.9 8,000 300
40 30.6 28.8 28.6 28.1 30.4 27.3 29.9 27.3 30.1 31.0 209.2
26.5 28.9 6,000
30 200
20 7.2 10.1 11.1 11.8 10.4 10.6 10.3 11.1 9.4 99.6
5.8 5.6 4.8 4,000 60.6
10 41.1 100
15.8
- 2,000 (13.8) 0.5
(45.5) (36.0)
(10) (78.2)(92.3)(98.3) -
(20) -
(30) (100)
(2,000)
(40) (51.2)
(50) (4,000) (254.6) (200)
(60)
(6,000) (300)
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

Gross margin (%) EBITDA margin (%)

Adj PAT (Rs mn) YoY growth (%; RHS)

Source: CRISIL, Nirmal Bang Institutional Equities Research Source: CRISIL, Nirmal Bang Institutional Equities Research

5 Ashok Leyland
 In s titu tio n a l E q u itie s

Exhibit 16: P/E chart

(x)
60

50

40

30

20

10

-
May-14

May-15

May-16

May-17

May-19
May-18

May-20
Feb-15

Feb-17

Feb-18

Feb-19

Feb-20
Feb-16
Nov-15

Nov-17

Nov-18
Nov-14

Nov-16

Nov-19
Aug-14

Aug-15

Aug-16

Aug-17

Aug-18

Aug-19

Aug-20
PE Mean 1sd -1sd
Source: Bloomberg, Nirmal Bang Institutional Equities Research

6 Ashok Leyland
 In s titu tio n a l E q u itie s

Financials
Exhibit 17: Income statement Exhibit 18: Cash flow
Y/E March (Rsmn) FY18 FY19 FY20 FY21E FY22E Y/E March (Rsmn) FY18 FY19 FY20 FY21E FY22E
Net Sales 262,479 290,550 174,675 166,642 223,421 OP/(loss) before tax 21,844 25,147 5,039 1,633 13,782
% Growth 31.1 10.7 (39.9) (4.6) 34.1 Depreciation & amortization 5,546 6,210 6,698 7,699 7,890
Raw material 186,213 206,796 123,692 119,982 157,065 Other income 1,898 1,099 1,233 1,351 1,659
Staff costs 18,119 20,988 16,151 14,998 17,427 (Inc.)/dec. in working capital 28,341 (29,030) (4,950) (4,368) 5,490
Other expenses 30,757 31,409 23,096 22,330 27,257 Direct taxes paid (4,966) (5,623) (1,073) (256) (2,745)
Total expenses 235,089 259,192 162,938 157,310 201,749 Other/extra-ordinary Items 1,671 359 (13,170) (121) (544)
EBITDA 27,390 31,357 11,737 9,332 21,672 Cash flow from operations (after
54,333 (1,837) (6,223) 5,938 25,532
E/O)
% Growth 24.4 14.5 (62.6) (20.5) 132.2
Capital expenditure (-) (7,534) (15,167) (17,964) (5,000) (8,000)
EBITDA margin (%) 10.4 10.8 6.7 5.6 9.7
Net cash after capex 46,799 (17,003) (24,187) 938 17,532
Other income 1,898 1,099 1,233 1,351 1,659
Other investing activities (29,238) 31,661 (831) (5,000) (5,000)
Interest costs 1,312 704 1,095 1,703 1,715
Dividends paid (-) (7,113) (9,098) (1,468) (587) (2,642)
Depreciation 5,546 6,210 6,698 7,699 7,890
Inc./(dec.) in total borrowings (9,605) (1,877) 25,975 4,297 (7,215)
Profit before tax (before
22,429 25,543 5,177 1,282 13,726 Others 81 8 - - -
exceptional items)
Exceptional items 122 575 1,558 - - Cash from financial activities (16,637) (10,966) 24,507 3,710 (9,857)
Tax 6,681 5,136 1,224 256 2,745 Opening cash balance 9,120 10,044 13,736 13,225 12,873
Adj PAT 15,748 20,407 3,953 1,026 10,981 Closing cash balance 10,044 13,736 13,225 12,873 15,547
% Growth 35.1 29.6 (80.6) (74.1) 970.7 Change in cash balance 924 3,692 (511) (352) 2,675
Adj PAT margin (%) 6.0 7.0 2.3 0.6 4.9 Source: Company, Nirmal Bang Institutional Equities Research
EPS (Rs) 5.4 7.0 1.3 0.3 3.7
% Growth 35.1 29.6 (80.6) (74.1) 970.7
Exhibit 20: Key ratios
DPS (Rs) 2.4 3.1 0.5 0.2 0.9
Y/E March FY18 FY19 FY20 FY21E FY22E
Payout (incl. div. tax) (%) 52.3 52.8 70.5 65.8 27.7
Per share (Rs)
Source: Company, Nirmal Bang Institutional Equities Research
EPS 5.4 7.0 1.3 0.3 3.7
Exhibit 19: Balance sheet EPS Growth (%) 35.1 29.6 (80.6) (74.1) 970.7
Y/E March (Rsmn) FY18 FY19 FY20 FY21E FY22E Cash EPS 7.3 9.1 3.6 3.0 6.4
Share capital 2,927 2,936 2,936 2,936 2,936 Book value per share 24.5 28.4 24.7 24.9 27.5
Reserves 68,721 80,389 69,704 70,022 77,816 DPS 2.4 3.1 0.5 0.2 0.9
Net worth 71,648 83,324 72,640 72,957 80,752 Payout (incl. div. tax) % 52.3 52.8 70.5 65.8 27.7
Total debt 5,157 3,984 31,053 37,053 31,553 Valuation (x)
Net deferred tax liability 2,984 2,497 2,648 2,648 2,648 P/E 11.5 8.9 45.9 176.7 16.5
Capital employed 79,789 89,806 106,341 112,659 114,953 Cash P/E 8.5 6.8 17.0 20.8 9.6
Gross block 63,121 75,926 96,199 101,199 109,199 EV/EBITDA 4.3 4.6 14.6 18.6 7.4
Depreciation 13,378 19,791 28,163 35,862 43,752 EV/Sales 0.4 0.5 1.0 1.0 0.7
Net block 49,742 56,135 68,036 65,337 65,447 P/BV 2.5 2.2 2.5 2.5 2.2
Capital work-in-progress 4,012 6,576 5,941 5,941 5,941 Dividend yield (%) 3.9 5.0 0.8 0.3 1.5
Investments 58,026 26,365 27,196 32,196 37,196 Return ratios (%)
Inventories 17,099 26,847 12,380 11,414 18,363 RoCE 29.8 29.2 5.9 2.6 13.4
Debtors 9,805 25,055 11,804 12,784 18,363 RoE 22.0 24.5 5.4 1.4 13.6
Cash 10,044 13,736 13,225 12,873 15,547 Profitability ratios (%)
Loans & advances & Other EBITDA margin 10.4 10.8 6.7 5.6 9.7
17,132 27,520 25,314 30,552 29,072
current assets
PAT margin 6.0 7.0 2.3 0.6 4.9
Total current assets 54,080 93,158 62,723 67,622 81,346
Turnover ratios
Creditors 46,586 50,179 26,239 22,828 33,666
Debtors (days) 14 31 25 28 30
Other current liabilities &
39,486 42,249 31,316 35,611 41,312 Inventory (days) 24 34 26 25 30
provisions
Total current liabilities 86,072 92,428 57,555 58,438 74,978 Creditors (days) 65 63 55 50 55
Net current assets (31,992) 729 5,168 9,184 6,368 Asset turnover (x) 3 3 2 1 2
Application of funds 79,789 89,806 106,341 112,659 114,953 Leverage Ratio
Source: Company, Nirmal Bang Institutional Equities Research Debt/equity (x) 0.1 0.0 0.4 0.5 0.4
Source: Company, Nirmal Bang Institutional Equities Research

7 Ashok Leyland
 In s titu tio n a l E q u itie s

Rating track
Date Rating Market price (Rs) Target price (Rs)
23 March 2018 Buy 142 167
23 May 2018 Buy 141 165
19 July 2018 Buy 111 129
18 September 2018 Buy 127 152
15 February 2019 Buy 84 152
2 August 2019 Buy 69 80
23 September 2019 Buy 75 80
13 November 2019 Buy 79 92
18 February 2020 Buy 82 98
30 March 2020 Buy 43 56
29 June 2020 Acc 52 52
14 August 2020 Acc 62 64
* Coverage shifted to Anish Rankawat wef 2 August 2019

Rating track graph

170

150

130

110

90

70

50

30
Feb-19

Feb-20
Feb-18

Mar-19
Mar-18

Mar-20
Apr-17

Apr-18

Apr-19

Apr-20
Aug-17
Sep-17
Nov-17
Dec-17

Aug-18
Sep-18

Sep-19
Nov-19
Dec-19

Aug-20
Nov-18
Dec-18

Aug-19
Jan-18

Jun-18

Jan-19

Jun-19

Jan-20
Jun-17

Jun-20
Jul-18

Jul-19

Jul-20
Jul-17
May-17

May-18

May-19

May-20
Oct-17

Oct-18

Oct-19

Not Covered Covered

8 Ashok Leyland
 In s titu tio n a l E q u itie s

DISCLOSURES
This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a
registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also a
registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.

NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have
different or contrary views on stocks and markets.

NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in
securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its
associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the
subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject
company at the end of the month immediately preceding the date of publication of this research report.

NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other
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Analyst Certification: I/We, Mr. Anish Rankawat, the research analyst and Mr. Ronak Mehta, the research associate, the authors of this
report, hereby certify that the views expressed in this research report accurately reflects my/our personal views about the subject
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for the preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in
making any recommendations.

9 Ashok Leyland
 In s titu tio n a l E q u itie s

Disclaimer
Stock Ratings Absolute Returns
BUY > 15%
ACCUMULATE -5% to15%
SELL < -5%
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10 Ashok Leyland