Ashok Leyland Fundamental Analysis

Introduction:

The rising middle class and the increasing youth population are leading to a high demand in India’s automobile sector. The indicative index, NIFTY Auto’s yearly gains of 51.71% as of 18 October 2024, shows the sector’s growth and also reflects a growing investment opportunity in the automobile manufacturing industry. 

The industry opportunity can be leveraged by investing in automobile manufacturing companies like Ashok Leyland, India’s second-largest commercial vehicle manufacturer. But what is Ashok Leyland share price? How stable is the company, and what does the fundamental analysis of Ashok Leyland say? Let’s find out. 

Overview of Ashok Leyland Limited:

Ashok Leyland is the Hinduja group’s flagship company, with a strong presence in the medium and heavy commercial vehicle (M&HCV) market. It ranks as the fourth largest bus maker in the world and the 19th largest truck manufacturer. Recently, it was recognized as the 34th-best brand in India. Headquartered in Chennai, Ashok Leyland operates nine manufacturing plants—seven in India and one in the UAE and UK.

The company has a broad portfolio in the auto industry with product concepts that set commercial vehicle (CV) benchmarks. In FY24, it held a 31% market share in the M&HCV segment and 20% in the LCV segment. Ashok Leyland also plays a key role in defense, supplying the largest fleet of logistics vehicles to the Indian Army and partnering with armed forces worldwide. Its portfolio includes diesel engines for industrial, genset, and marine uses, along with electric vehicles through Switch Mobility.

The company has one of the largest networks in the commercial vehicle industry, with 52,863 touchpoints, including 1,748 exclusive ones and 11,207 outlets for Leyparts. Additionally, Ashok Leyland runs driver training institutes across India, having trained over 8,00,000 drivers to date. 

Share Holding Pattern:

The shareholding pattern for the company as of September 2024 is as follows-

Key Management Personnel:

Ashok Leyland was founded by Raghunandan Saran in Chennai, where it began as ‘Ashok Motors’. The leadership baton currently lies in the hands of the following executives-

Mr. Dheeraj G. Hinduja (Executive Chairman):

Mr. Dheeraj Gopichand Hinduja earned his B.Sc. (Hons) in Economics and History from University College, London, in 1993. He represents the Hinduja Group, and his expertise includes global business strategies, building and transforming organizations, and attracting top Boards and management talent. 

Mr. Gopal Mahadevan (Director):

Mr. Gopal Mahadevan is a Chartered Accountant and Company Secretary with 35+ years of experience in finance across various industries. He has worked in manufacturing, internet services, financial services, and project companies. Throughout his career, Mr. Gopal has been part of leading organizations like Thermax, Amara Raja Batteries, Sify, Sanmar Group, and TTK Pharma. He also serves on the board of multiple companies within the Ashok Leyland Group.

Mr. Shenu Agarwal (MD & CEO):

Mr. Shenu Agarwal is an NIT Kurukshetra graduate with Honors and holds an MBA from Duke University, USA. He brings over 25 years of hands-on experience in Sales, Marketing, R&D, Product Management, Strategy, Project Management, New Business Start-ups, and Strategic Tie-ups. Previously, he served as the President of Agri Machinery and Construction Equipment at Escorts Kubota Limited.

Ashok Leyland Financials:

Revenue (Gross Sales):

The company’s revenue has been growing steadily since 2020-21. It reached its highest-ever sales revenue of Rs.38,367 crore in FY24, marking a 6% increase from the previous year. This growth came from selling 1,94,555 vehicles, 32,374 engines, and 3,469 spare parts and other items.

EBITDA:

The company’s EBITDA as of FY2024 was Rs.4607 crore, an all-time high level with a 57% growth from FY2023. Additionally, it was Rs.911 crore for the quarter ending June 2024. Over the years, the EBITDA trend for the company has been as follows-

Profit After Tax:

The company posted a record profit (PAT) of Rs.2,617 crore, its highest ever. The previous record was Rs.1,983 crore in FY19. This marks a 90% growth compared to the previous year. As of the quarter ending June 2024, this figure had already reached Rs.526 crore. Over the past few years, the trend in the company’s PAT has been as follows-

Key Financial Ratios for Ashok Leyland:

As of the financial year ending 31st March 2024, the key financial ratios of the company are as follows:

• Current Ratio: The company’s current ratio is 0.96, which means that for every Rs.1 of liabilities, it has Rs.0.96 in assets. A current ratio lower than 1 is generally considered less favorable. 
• Debt-to-Equity Ratio: The company’s debt-to-equity ratio is 0.01, which means that for every Rs.100 of equity, the company has only Rs.1 in debt. 
• Return on Capital Employed: The company’s ROCE is 15%. This means that the company generates a profit of 15 paise for every rupee of capital employed in the business. 
• Return on net worth: The company gave a 30.8% return on its net worth, meaning that for every Rs.100 of equity invested by the shareholders, it earned Rs.30.8 as profit. This indicates an effective use of shareholder funds to generate profits. 
• The company achieved a 31.1% market share in the  M&HCV Bus and Truck segment in FY2024. 

(Source: Annual Report) 

Ashok Leyland Share Price Analysis:

A company’s share price analysis can be done through both techniques; thus, the question of fundamental analysis vs technical analysis doesn’t affect the outcome. Ashok Leyland was listed on the NSE on 25th May 1995. As of 18th October 2024, the company’s share price is Rs.223.40, and its market cap stands at Rs.65,599.79 crore. In the last twelve months, the stock investment advisors have seen the company stock grow 27.15%, lower than the index growth of 52.08% seen in NIFTY Auto. The company stock, however, crossed the NIFTY50 returns of 26.35% and the SENSEX returns of 23.30% as of the same date.  

Key Highlights of Ashok Leyland For FY2024:

• The company’s aftermarket business grew by 28% over the past year. It also climbed to 2nd place in Sales & Service Satisfaction, showing the impact of its customer-focused initiatives.
• In International Operations (IO), the company saw a 5% increase, delivering 11,853 units in FY24, up from 11,289 units in FY23.
• On March 25, 2024, the Board of Directors declared an interim dividend of Rs.4.95 per equity share for the financial year ending March 31, 2024.
• Over the past three years, the company has achieved strong profit growth of 117.9% and revenue growth of 35.85%. It has also maintained a Return on Capital Employed (ROCE) of 21.57%.
• In October 2024, Ashok Leyland secured a contract to supply 180 electric trucks to Group BillionE.

Bottomline:

Ashok Leyland Limited’s shares have a PE ratio of 23.87, which is lower than that of Force Motors share price. The company’s financial performance in FY2024 is comparatively better than in previous years, considering the record sales and revenue generated this year. However, whether to invest in the automobile sector or not, and if yes, whether to choose Ashok Leyland or go with Tata Motors share price, must be decided based on your financial profile and relevant industry factors like market trends and growth rate. 

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ