Ashok Leyland
Q1 FY26
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- Highest ever Q1 revenue (Rs. 8,725 crore), EBITDA (Rs. 970 crore), and PAT (Rs. 594 crore; +13% YoY).
- EBITDA margin improved to 11.1% (+50 bps YoY).
- Net cash position of ~Rs. 800 crore vs. net debt of Rs. 1,200 crore last year.
- MHCV market share rose to 31.1% (from 29.8% YoY); LCV Vahan market share up to 12.9% (+120 bps YoY).
- Exports volume up 29% YoY; aftermarket revenue up 8% YoY; power solutions revenue up 28.5% YoY.
- Switch India achieved PBT breakeven; order book at 1,500+ buses.
- OHM operating >850 buses with >98% fleet availability; targeting 2,500+ buses in 12 months.
- Dealer satisfaction index improved to #1; customer & sales satisfaction index at #2.
Key Negatives
- Domestic MHCV industry volume declined 2% YoY on a high base.
- Q1 defence revenue declined sharply (Rs. 400 crore to ~Rs. 120–150 crore YoY).
- Some asset quality concerns in broader CV financing landscape, though not seen in HLF.
Forward Guidance
- Capex: New Andhra Pradesh plant ramping to 200 units/month by year-end; Lucknow bus plant operational from Q3 FY26; capacity enhancement at Alwar and Trichy bus plants.
- New products: Launching 280/320/360 HP tippers, tractor trailers, multi-axle vehicles, LNG models, upgraded 13.5m and new 15m buses, bi-fuel LCV, and upgraded international products.
- Client wins/losses: Strong defence order book (Rs. 1,000+ crore) and pipeline (Rs. 2,000+ crore tender won, orders awaited).
- Revenue/margin outlook: Optimistic for H2 FY26; expect volume and margin uptrend, with aspiration to beat last year’s margins.
- Strategic initiatives: Expanding domestic and international network; focus on premiumization, cost leadership, and service excellence; ongoing ESG and RE100 commitments (81% RE achieved).
2 · Q&A Highlights
Q 1 (Margins & Cost Pressures): How did Ashok Leyland maintain margins despite commodity and regulatory cost pressures, and what is the outlook?
A (Management):
• Successfully passed on AC cabin costs; improved pricing and model mix (higher multi-axle sales); commodity pressures (esp. steel) easing; overheads controlled; non-CV businesses contributed to profitability.
Q 2 (HLF Restructuring & CV Financing): What is the timeline for Hinduja Leyland Finance restructuring and current asset quality trends?
A (Management):
• Restructuring process will take at least 2–3 quarters due to regulatory steps; no red flags in HLF asset quality; seasonal CV financing stress is typical but not a concern currently.
Q 3 (Demand Outlook): Why is replacement demand not translating into higher MHCV volumes, and what is the full-year outlook?
A (Management):
• Awaiting higher on-ground capex and interest rate transmission; expect mid-single digit growth for MHCV and LCV; international markets, especially GCC, performing strongly.
Q 4 (OHM Investment & Funding): What is the capital requirement for OHM and plans for further investment?
A (Management):
• Rs. 300 crore invested, with another Rs. 300 crore planned—sufficient till March 2026; open to other funding options in future.
Q 5 (Capacity Expansion): What is the current capacity utilization and expansion plan?
A (Management):
• Overall capacity sufficient for 2–3 years; expanding fully built bus capacity from 950 to 1,650 units/month; current utilization ~70%.
Q 6 (Margins vs. Volumes): How will margins trend if volumes do not pick up?
A (Management):
• Margins depend on business/segment mix, cost controls, and premiumization; focus remains on sustainable margin improvement, not sacrificing margin for market share; aspiration to exceed last year’s margins.
Q 7 (Defence Business): What is the defence order book and revenue outlook?
A (Management):
• Order book at Rs. 1,000+ crore; Rs. 2,000+ crore tender won, orders awaited; bullish on defence for FY26 and FY27.
Q 8 (OHM Payment Security): Are OHM’s operations covered under payment security mechanism?
A (Management):
• Existing buses not covered, but new orders from PM E-DRIVE tender (10,900 buses) will be under payment security; current clients (TN, Bangalore) are reliable paymasters.
3 · Other Key Numbers
- Net profit Q1 FY26: Rs. 594 crore (+13% YoY)
- Revenue: Rs. 8,725 crore (+1.5% YoY)
- EBITDA: Rs. 970 crore (+6.4% YoY)
- EBITDA margin: 11.1% (+50 bps YoY)
- Net cash position: ~Rs. 800 crore (vs. net debt Rs. 1,200 crore YoY)
- MHCV market share: 31.1% (vs. 29.8% YoY)
- LCV Vahan market share: 12.9% (+120 bps YoY)
- Domestic MHCV volume (ex-defence): 25,641 units (+2% YoY)
- Domestic LCV volume: 15,566 units (+1.4% YoY)
- LCV Vahan sales: 15,436 units (+8% YoY)
- Exports volume: 3,011 units (+29% YoY)
- Aftermarket revenue: +8% YoY
- Power solutions revenue: +28.5% YoY
- Material cost as % of revenue: 70.6% (1.6% lower YoY)
- MHCV touchpoints: 1,073; LCV touchpoints: 851; target >2,000 combined by year-end
- Switch India order book: 1,500+ buses; achieved PBT breakeven in Q1
- OHM: >850 buses operated, >98% fleet availability, added 200+ buses in Q1, targeting 2,500+ buses in 12 months
- HLF standalone AUM: Rs. 50,430 crore (+25% YoY)
- HHF AUM: Rs. 14,265 crore (+25% YoY)
- Finance subsidiaries’ total income: Rs. 1,855 crore; book value: Rs. 7,222 crore
- Consolidated Net NPA: 1.63%
- HLF capital adequacy ratio: 18.2%
- AL shareholding in HLF: 61.12%
- Defence order book: Rs. 1,000+ crore; tender won: Rs. 2,000+ crore (orders awaited)
- Q1 defence revenue: ~Rs. 120–150 crore (vs. Rs. 400 crore YoY)
- RE100 status: 81% (TN plants at 95%)
- Road to School program reach: ~5 lakh students; 11,000+ students in capacity building/counseling in Q1
- Road to Livelihood: 200+ women from 15 villages enrolled in Q1
- Planned OHM investment: Rs. 300 crore (additional)
- No incremental funding planned for HLFL in FY26
- Fully built bus capacity: expanding from 950 to 1,650 units/month (including Lucknow plant)