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Yes Securities Report
Ashok Leyland Ltd.'s Q1 FY23 results were weak dented by record low gross margins at 20.7% (our estimate 22%, down 110 basis points QoQ). Price hikes of 1‐2%/quarter is lagging raw material and non‐raw material inflation pass through impacting Ebitda margins which came in at 4.4% (our estimate 7.6%, down 440 bps QoQ).
The management indicated margins recovery QoQ from Q2 led by softening of steel prices. Going forward, with
strong volume recovery in medium and heavy commercial vehicles (~31% compound annual growth rate over FY22‐24),
visible recovery in bus segment (Ashok Leyland being the market leader historically),
improving product mix (growth in defense, exports and light commercial vehicles) should help Ashok Leyland's profitability in the near to medium term. This will be further aided by increased price retention (net pricing less of discounts) given positive fleet sentiments.
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