Ashok Leyland margins slide to multi-quarter low amid cost pressure

Ashok Leyland's standalone revenue grew 10.4% year-on-year to Rs 9,634 crore in the June quarter, aided by a 10% rise in volumes to 48,763 vehicles. However, Ebitda margin fell to a multi-quarter low of 10.1% from 14.6% in the preceding quarter and 11.1% a year ago, hit by higher raw-material and staff costs, according to livemint.com.

Domestic M&HCV market share dropped to 28.6% from 30.2% last year, while LCV share held steady at 11.2%. Management expects industry growth in Q2 to exceed the 13-14% seen in Q1, with M&HCV growth in high single digits in FY27 and stronger LCV growth. Replacement demand, better financing conditions and lower interest rates could drive further sales. Since the start of FY27, the company has taken price hikes of around 2.25% and is considering another increase. Cost pressures are expected to peak in Q2 before easing in Q3.

Export volumes fell 18% in Q1 due to disruptions at the UAE plant, which has since recovered to about 600 vehicles a month in July. Ashok Leyland aims to raise LCV market share in the 2-3.5 tonne segment to 25%, double spares revenue and achieve 20% export-volume CAGR over 2-3 years. Investors will track M&HCV market share and margin recovery, Nuvama Research estimates FY27 revenue of Rs 49,165.5 crore with an Ebitda margin of 12.5%.