×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Ashok Leyland sales growth robust

Ashok Leyland sales growth robust
Comment E-mail Print Share
First Published: Thu, Sep 02 2010. 10 28 PM IST

Graphic: Yogesh Kumar/Mint
Graphic: Yogesh Kumar/Mint
Updated: Thu, Sep 02 2010. 10 28 PM IST
For August, Ashok Leyland Ltd registered a strong 56.4% year-on-year (y-o-y) growth in sales to 7,480 units. The sales figure was 10% higher than that of July, too. The sales upswing was driven by sustained performance in two segments—medium and heavy commercial (M&HCV) goods vehicles, and buses. Ashok Leyland shares, too, have been rising in tandem—the stock, which closed at Rs.74.50 on Thursday, has risen by 23.7% since 1 June.
Ashok Leyland clocked a 63.4% y-o-y jump in medium and heavy commercial goods vehicle sales during the month. This segment normally rises with a lag compared with light commercial vehicles, as economic growth picks up. Sales momentum has been sustained despite a 1.5% price hike in April and 2.5% increase in June. An IIFL report, taking 10 years of data, has shown a 65% correlation between change in CV sales and change in the Index of Industrial Production (IIP).
Graphic: Yogesh Kumar/Mint
“Adding to demand is the advancement of purchases as the new emission norms come into force from 1 October, leading to a substantial hike in prices,” said Umesh Karne, analyst, Brics Securities Ltd. In fact, this pre-buying is expected to keep volumes strong until October.
What has been established over the last several quarters is the increasing contribution of the bus segment to Ashok Leyland’s total sales. In August, it sold 2,193 buses, 46.5% higher on a y-o-y basis. Exports of buses, though minuscule at 337 units, were up 56%. The company recently won an order from Sri Lanka for 1,000 buses to be supplied before March.
Analysts say Ashok Leyland has a firmly entrenched 38% share in the domestic market for buses, too. They expect a steady order inflow of 1,000-1,500 buses on a monthly basis, as public transport units modernize their fleet.
Given these factors, the total sales outlook for the next couple of months is promising. The parent Hinduja group’s entry into vehicle financing could help boost market share—it has already increased from 23% in March to around 26%. This is despite tough pan-India competition from its rival and market leader, Tata Motors Ltd, which also registered a 34% y-o-y growth in medium and heavy commercial vehicle sales volumes to 16,716 units in August, despite the higher base. Ashok Leyland is hopeful of gaining market share in northern markets, as its new Uttarakhand plant increases production.
But how much this volume momentum translates into higher profitability depends on the movement of raw material costs, especially steel and rubber. Another key factor will be the firm’s pricing power—to be able to pass on higher costs amid stiff competition as it enters new markets.
marktomarket@livemint.com
Comment E-mail Print Share
First Published: Thu, Sep 02 2010. 10 28 PM IST