Ashok Leyland margin is robust

For Ashok Leyland, the financial year 2024 is mainly about the stellar margin performance. For the second consecutive quarter, the commercial vehicle manufacturer has clocked a sequential improvement in Ebitda margin.

- Harsha Jethmalani, Pallavi Pengonda

For perspective, in the December quarter (Q3FY24), Ashok Leyland’s Ebitda margin, a key measure of profitability, improved to 12%, up from 11.2% in Q2, and 10% in Q1. With this, the company is poised to clock the guided double-digit margin for the full year. This also suggests it is moving in line with its medium-term target of reaching mid-teen margin.

The upshot is that year-on-year Q3 Ebitda growth came in at almost 40% to ₹1,114 crore with margin expanding by 320 basis points (bps). One basis point is one-hundredth of a percentage point.

This is at a time when revenue growth stood at a mere 2.7% — a function of lower volumes to a good extent. In its Q3 earnings conference call, the management said that the domestic medium & heavy commercial vehicle (MHCV) industry in the first three-quarters of FY24 has grown by 9% versus the same period last year. However, growth in H1FY24 stood at 10%, and slowed down to 7% in Q3 mainly affected by elections in several large states in the country.