Domestic auto industry volumes have been on a steady mend in the months post lifting of lockdown restrictions. Manufacturing and distribution activities have been getting ramped up gradually since June 2020, in step with the rest of the economy. However, the impact of the pandemic on the supply chain continues to inhibit a complete return to production normalcy. Nevertheless, most automotive industry segments have reported successive improvement in offtake throughout June-November 2020 (Exhibit 1) on the back of (i) initial bounce provided by pent-up aspect,...

Aditya Birla Fashion and Retail: ABFRL's 2Q performance recovery lagged that of peers (ex-department chains) as both anchors Madura and Pantaloons limped their way back to recovery. Margin delivery improved and was better than expected (0.2% vs HSIE: -14%) but still in the red (pre-IND-AS116) as management continued its tight leash on costs. Net debt/equity has remained elevated since Mar-20 as the retailer had to soothe vendor nerves (reduction in payables). We have built in the recent Rs. 15bn fundraise from Flipkart + Rights issue proceeds in our forecasts and maintain our REDUCE recommendation with a DCF-based target price of Rs. 140/sh, implying 12x Sept-22 EV/EBITDA (Post IND-AS). Vinati Organics: Our SELL recommendation on Vinati Organics with a discounted cash flow-based target price of INR 925 (WACC 10%, terminal growth 3%) is driven by (1) demand slowdown for the high-margin 2-Acrylamido 2-Methylapropane Sulphonic Acid (ATBS) that contributed ~60% to its revenue mix in FY20, (2) shift in revenue mix towards lower-margin Iso Butyl Benzene (IBB), which formed ~25% of the mix in 2Q versus 16% in FY20, and (3) slow ramp-up in the recently-commissioned Butyl Phenol product line (still below 5%). In the absence of a new product pipeline, we believe current valuations are high at ~34x Sept-22E EPS. 2Q EBITDA/PAT were 17/24% below estimates owing to a 12% decline in revenue courtesy lower volumes for ATBS. Sonata Software: We maintain BUY on Sonata based on robust recovery and better operating performance. IT Services (IITS) revenue grew 6.8% QoQ (estimate 3%) and margin expanded 126bps QoQ...

Ashok Leyland (AL) is the second-largest Commercial Vehicle (CV) manufacturer in India. It has a strong presence in the truck segment with a market share of 32% as of FY20. Q2FY21 revenue de-grew by 28%YoY due to subdued demand and lower economic activities. However, strong volume growth in the LCV segment at 25%YoY offset further decline. EBITDA margin expanded on a QoQ basis owing to better cost...

Ashok Leyland remains well positioned to benefit from strong recovery in CV cycle in FY22-23E on the back of new product launches and a well diversified product portfolio. We revise our rating from BUY to HOLD while keeping our TP of Rs. 90 unchanged and continue to value the stock at 16x its FY23E

Sales, PAT CAGR are expected at 14.3%, 77.8% CAGR, respectively, in FY2023E (low base). We believe a cyclical turnaround in domestic CV industry is close, as indicated by sharp improvement in recent volume prints. Hence, we maintain BUY on ALL, valuing it at | 100 (SOTP; 10x FY23E CV segment EV/EBITDA, 1.5x P/B for investments). Key upside risk to our estimates is...

Ashok Leyland (AL) reported largely in-line results for 2QFY21. While M&HCV; has started showing some signs of initial recovery, LCV is back at pre-COVID levels. The normalization of working capital has enabled QoQ reduction in net debt by INR12b. M&HCV; is expected to make a strong recovery in 2HFY21. Moreover, continued traction for LCV would enable strong recovery at the company level. We maintain our estimates for FY22/FY23 as the market is recovering in...

Ashok Leyland's (AL) Q2FY21 revenue and earnings were broadly in line with our estimates.

Ashok Leyland (AL), flagship of the Hinduja Group, is the 2nd largest manufacturer of commercial vehicles (CV) in India and 12th largest manufacturer of trucks globally. It is headquartered in Chennai and has 9 manufacturing facilities

Seminal year for industry provides interesting insights However, amid all the gloom, the engineering and production prowess of the industry (along with its value chain) shone brightly as it successfully completed the world's fastest switchover to Euro 6 equivalent emission norms i.e. BS-VI as per schedule. Much of the post festive period was focused on the transition, with the entire ecosystem estimated to have spent ~| 70,000 crore towards the technological leap. Covid-19 crisis struck India in the run up to April 2020, just as the changeover...

Ashok Leyland Ltd (ALL) is witnessing month on month improvement in MHCV sales as economic activities pick up with the Government opening the economy. A progressive improvement in Index of Industrial Production (IIP) point at picking up of industrial activities which is leading to increased MHCV demand. We expect MHCV industry to witness stronger recovery cycle from FY22 driven by normalisation of economic activity and pent up demand post two consecutive years of downcycle in FY20 and FY21. With the launch of a new LCV platform, ALL has closed an important gap...

9 September 2020 primarily due to liquidation of BS-IV inventory, which led to decline in inventory by INR14.5b YoY to INR12.4b in FY20. This resulted in inventory days declining by 10 days YoY to 37 days. Thus, earnings to Standalone free cash flow (post interest) remained negative at During FY20, the company capitalized expenses of INR2.9b, 43.6%/3.8% of R&D;/gross block). This primarily pertains to BSVI, AVTR (Modular Platform) and the LCV project. These mainly comprised (a) employee benefit expense of INR0.7b, (b) finance cost of INR0.3b, and (c) other expense of INR3.6b. Total intangibles mainly due to in-house developed technical knowhow of INR8.2b.

Ashok Leyland (AL) Standalone revenue declined 89% YoY at INR 6.5 bn. Realizations improved ~19% YoY at INR 1.7 mn led by higher spare sales. Volume declined ~90% YoY/ 85% QoQ to 3.8k units. Share of MHCV sales declined to 27% (v/s 67.5% in Q1FY20). Better gross margins at 35.9% (+580 bps YoY) were offset by higher other cost at INR 2.1 bn resulting in higher EBITDA loss at INR 3.3 bn (INR +5.4 bn in Q1FY20). Adjusted loss for the quarter came higher at INR 3.9 bn (+INR 2.4 bn in Q1FY20) led by higher interest cost at INR 768 mn. The domestic MHCV industry has been in a downturn since Nov'18, and FY20 has been the worst year in the past 20 years. M&HCV; sub-segment, in particular, continued to remain subdued during last couple of months. With manufacturing and economic activity still muted in the 'unlock' phase, freight movement remains well below previous levels (fleet utilisation at ~50-55%)...

Ashok Leland (AL) loss for the quarter stood at Rs 3,888 Mn during Q1FY21 due to weak macro-economic factors coupled with the movement restrictions to contain the coronavirus pandemic. Standalone revenue stood at Rs 6,452 Mn for Q1FY21 vs Rs.56,118 Mn for the Q1FY20. Company has reported EBITDA loss of Rs 3,332 Mn, as...

Preparing to reap fruits when the recovery starts Ashok Leyland (AL) reported a loss of Rs3.87bn, higher than NBIE estimate of Rs3.3bn. The miss was mainly due to weak operating performance. AL reported an exceptional loss of Rs17mn during the quarter towards liabilities of discontinued products from the LCV division. Net revenue of Rs6.5bn, down 88.5% YoY, was ahead of our estimate. Gross margin improved by 580bps YoY and 700bps QoQ to 35.9% on account of favorable segment mix (higher share of spares and other non-CV segments), lower discounts, benign commodity costs and cost reduction efforts. AL took BS-VI related price hike of 15-20% on MHCVs and 15-18% on LCVs on a blended basis. However, negative operating leverage due...

Ashok Leyland reported weak Q1FY21 results - revenues for the quarter stood at Rs 651 crs resulting in a decline of 89% YoY. Q1FY21 revenues de-grew by 88.5% YoY and was down 83% QoQ. This was on the back of volume decline of 90.4% YoY.

Ashok Leyland's (AL) Q1FY21 performance was disappointing despite a strong boost to blended average realisations from BS-VI price upgrades.

We upgrade AL to BUY (from Accumulate) with price target of Rs76 (v/s Rs59) as we believe M&HCV; volumes to start recovering by 1HFY22 based on 1) economy linked recovery benefitting demand from end user segments like infra, mining and e-commerce, 2) AL is de-risking domestic M&HCV; through - a) new launches in LCV which will help gain market share b) increased focus...

While the topline performance is expected to remain fairly subdued in FY2022E, margin trajectory is seen improving, largely on the back of actions initiated on the cost front. ALL's cost savings programme K54 has delivered benefits worth ~| 500 crore in FY20, with the focus remaining on driving further efficiencies across areas in coming quarters. Modular programme AVTR is also seen helping by reducing inventory needs and production complexity. ALL expects to close FY22E with much better profitability levels than FY20. We build uptick in margins to 10% by that time, also factoring in...

M&HCV; total volumes were down by 96% YoY to 1021 units, while total volumes of LCV segment declined of 78% to 2793 units. Total Volumes (M&HCV; and LCV) were down by 90% to 3814 units. The company reported absolute EBTIDA loss of INR 333.20 Cr in Q1FY21 compare to EBITDA of 537 Cr in corresponding quarter last year. Decline in EBTIDA was on account of higher fixed cost due to lockdown and lower operating leverage. For Q1FY21, AL reported Net loss of INR 389 Cr as compare to net profit of 230.20 Cr in corresponding quarter last year. Decline in profitability was due to poor operating performance and sharp decline in overall revenue....

performance on all fronts during 2QFY20. The reported profit jumped by 21% YoY to Rs2,550mn pandemic, however, we believe things have bottomed out in the industry with almost every macro on account of a) lower effective tax rate of 17.8% in Q2FY20 vis--vis 31.0% in Q2FY19, b) better indicator flashing signs of improvement. LCVs are already seeing a healthy recovery. Ashok...