>ASHOK LEYLAND (IDFC SSKI)

HIGHLIGHTS OF Q4FY09 RESULTS

■ Ashok Leyland’s Q4FY09 results have been ahead of our estimates primarily on account of better than expected operating performance.

■ The company has posted a steep decline of 53%yoy in net sales to Rs12.2bn (we saw Rs13.3bn) on account of 61%yoy fall in CV volumes. The contribution of non-cyclicals to revenues has increased from 33% to nearly 50% in FY09 due to robust sales of power gensets and spare parts as well as on account of the sharp decline in goods M&HCV volumes during the period.

■ Adjusting for the Rs180mn unrealised forex gain included in other expenses, margins for the quarter at 7.9% (we saw 7.2%) were down 400 bp yoy, but better 100bp qoq.

■ Interest burden for the quarter increased to Rs440m against Rs394mn in Q3FY09 and Rs91mn in Q4FY08 on account of higher working capital and drawdown of the USD200mn ECB loan. Being eligible under MAT the company reported a reversal of taxes of Rs224mn during the quarter.

■ Adjusted PAT for the quarter declined 77%yoy to Rs443mn (we saw Rs338mn).

■ Other key highlights:

• Total inventory in the system for ALL is 7,500 units. The company is targeting to reduce this to 3,000-3,500 units within the next few months which would reduce its working capital requirements by about Rs5bn-7bn and thereby reduce interest costs.

• Given the marked slowdown in the domestic CV industry, the company has consciously pruned its capex over the next three years to Rs20bn from the earlier planned Rs30bn.

• Ashok Leyland has so far received orders to manufacture about 2,800 buses of the total 5,330 bus order released under the JNNURM scheme.

To see full report: ASHOK LEYLAND