Revving up! Ashok Leyland - Motilal Oswal

Ashok Leyland
Savings due to fiscal incentives at Pantnagar (INR/Unit)
Ramp-up at Panatnagar to drive margins
Trend in excise duty
Pantnagar plant: Income statement
FY12E FY13E FY14E
Volumes (units) 29,000 32,000 38,000
Net sales (INR m) 41,102 47,784 57,744
Net realn (INR / unit)* 1,417 1,493 1,520
EBITDA (INR m) 3,721 5,303 6,808
EBITDA margins (%) 9.1 11.1 11.8
EBITDA (INR / unit)* 128 165 179
PAT (INR m) 2,696 4,216 5,608
PAT (INR / unit) 92,961 131,745 147,577
Growth (%) 707.8 41.7 12.0
(*'000)
Source: Company, MOSL
Pricing power likely to remain weak
Weak economic outlook coupled with declining freight rates signals muted outlook
for the industry. The slowdown has become more pronounced over the last couple of
months. To induce demand, incumbents are offering higher discounts. Pricing power
of the incumbents is likely to remain weak in the short term, as demand outlook
remains muted. We expect AL's EBITDA margin to improve by 20bp/30bp in FY13/FY14
to 10%/10.3%.
Dost - margin dilutive but EBITDA accretive
The marketing of Dost is structured so as to optimize the sales tax benefit available to
the JV. All sales within Tamil Nadu are done by the JV through AL's marketing network.
Outside Tamil Nadu, sales are done directly by AL. As a result, only sales outside Tamil
Nadu reflect in AL's revenue and cost; for sales within Tamil Nadu, AL only books
marketing fees (part of other operating income) in its P&L. While Dost is margindilutive
(due to inflated RM cost), it would be EBITDA and PAT accretive, with
contribution of 7%/6% at EBITDA and 14%/11% at PAT level in FY13/FY14.
12 November 2012
20