Revving up! Ashok Leyland - Motilal Oswal

Ashok Leyland
Revival of demand in South India to drive market share gain
In FY12, AL lost 250bp market share, primarily due to slowdown in South India, its
largest market. It is the dominant player in South India, holding ~51% market share. In
FY12, volumes in South India were impacted by elections in Tamil Nadu, political
uncertainty in Andhra Pradesh and ban on mining in Karnataka. Moreover, the impact
was higher in segments where AL has greater exposure. Industry volumes for MAVs
fell 17% in South India, while remaining flat across the country. The 4x2 haulage
segment also de-grew by 15% in South India.
AL: Trend in market share (region-wise)
Source: Company, MOSL
Recovery in South India
led to AL's market share
recovery to ~25.7% in
2QFY13
AL has indicated that activity levels have already begun picking up in South India,
resulting in improvement in overall market share to 25.7% in 2QFY13, as against 23.3%
in FY12. Also, the Supreme Court has partially lifted the ban on iron ore mining in
Karnataka by allowing re-start of mining up to 25mtpa in the Bellary region and up to
5mtpa in the Tumkur and Chitradurga regions. Our Metals & Mining team believes
that it would take 4-6 months for mining to re-start in the region. We expect
incremental volumes from South India to largely kick in from 2HFY13, resulting in
partial recovery of lost market share.
Four new M&HCV launches in 2HFY13 to support volume growth
AL has lined up four new M&HCV launches for 2HFY13. It plans to introduce a) Next
gen ICV vehicle, b) 10x2 30T vehicle (5 axle), c) Jan Bus (world's first front engine
single-step flat floor bus), d) Neptune engine tipper, and e) 2-3 variants to Stallion
vehicle on defense side. Also, it plans to launch Avia fleet of trucks in India, which are
already operational in European markets. It currently manufactures the Avia range of
vehicles at its Prague plant, especially for European markets. In addition to the Prague
plant, it will also manufacture Avia trucks at its Pantnagar plant. Besides this, the
company is also planning to launch Neptune engines. We expect these launches to
support volumes in 2HFY13 and beyond.
12 November 2012
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