Indian commercial vehicle manufacturer Ashok Leyland has reported strong profits in its Q4 results. The company’s net profit of INR 568 crore ($75m) came from an increase in production volumes, particularly in the light commercial vehicle segment, which grew by 71%. Despite the positive results, the report also revealed a cash outflow related to a switch from BS-IV to BS-VI technology and compliance with the new emission norms, which had been expected.
Elevated production drives profits
Ashok Leyland reported a strong Q4 performance, with its net profit increasing by 79% YoY to INR 568 crore ($75m). The company attributed this growth to the increase in production volume in Q4, particularly in the light commercial vehicle segment, which grew by 71%, and the medium and heavy commercial vehicle segments, which grew by 18%.
Ashok Leyland also reported total revenue from operations of INR 7,034 crore ($930m), up 12% YoY. The company said that new product launches, technological advancements, and improved market sentiment were other key factors for its robust revenue growth during the quarter.
Cash outflow for switch to BS-VI
The company’s results also revealed a cash outflow of INR 983 crore ($130m) related to the switch from BS-IV to BS-VI technology and compliance with the new emission norms, which had been expected. The government of India set a deadline of April 1, 2020, for the implementation of BS-VI emission norms across the country.
Despite the outflow, Ashok Leyland said it had successfully completed the transition to BS-VI and launched several new products during Q4 2021-22. The company added that it was confident about sustaining growth momentum with its strong BS-VI product portfolio.
ICICI Bonds on Ashok Leyland
ICICI Bonds said that Ashok Leyland’s better-than-expected performance in Q4 2021-22 was driven by elevated production volumes and gross margin expansion. The firm said that new product launches, improved cost efficiencies, and better capacity utilisation resulted in higher volumes, which helped drive profitability during the quarter.
ICICI Bonds also noted that the company’s cash outflow related to the BS-VI implementation was in line with expectations. The firm said that Ashok Leyland’s successful transition to BS-VI technology and its strong product portfolio in the segment could support its growth in the coming quarters.
Outlook for Ashok Leyland
Ashok Leyland’s management expressed confidence in the company’s growth prospects in the near term. The company’s CEO and Managing Director, Vipin Sondhi, said that Ashok Leyland’s focus on network expansion, new product development, and cost efficiencies had led to strong growth and improved market share. He added that the company remained committed to its long-term goal of achieving leadership in the commercial vehicle segment.
Overall, Ashok Leyland’s results suggest that the company is on a strong growth trajectory, despite the cash outflow related to the BS-VI transition. The company’s ability to sustain the growth momentum through new product launches and improved operational efficiency will likely be key factors in driving its future growth.
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