Close [X]

Ashok Leyland sees 15% FY17 growth, despite blip

Ashok Leyland moves court against Nissan

  Ashok Leyland underperformed its commercial vehicle peers in May, with its medium and heavy commercial vehicle (M&HCV) sales growing eight per cent year-on-year. The fall is attributed to delay in purchases in south India due to elections and discounting by rivals. In contrast, Tata Motors registered a growth of 24 per cent and Eicher Motors 30 per cent. While the industry growth in M&HCV has come down to 20 per cent in May from 26 per cent in April, analysts believe volumes are still healthy.

While Ashok Leyland's performance was lower than expectations, analysts are not too worried as the company recorded a 14 per cent year-on-year growth in cumulative sales for April and May. Recently, Ashok Leyland indicated volume growth in FY17 would be 15-20 per cent, in line with analyst estimates. The company had been outselling its rivals over FY16 — thus, it gained 600-basis-point share in the M&HCV space.

Ashok Leyland sees 15% FY17 growth, despite blip

  Despite the May blip for Ashok Leyland, the sector will grow at a healthy rate, say analysts. Credit Suisse believes growth will be buoyant in FY17 as trucks have already gained freight share from railways and buying before BS-IV norms kick in would be a further boost. BS-IV norms relate to automobile emission. Freight refers to goods transported by any means, such as trucks and railways. Ambit Capital pegs sector growth at 16 per cent for FY17 on continuing macro-economic recovery, low base, and buying before April 1, 2017, when BS-IV norms kick in, since vehicles complying with the new rules will be costlier.

Though the Ashok Leyland stock fell 4.5 per cent on Wednesday, most analysts remain bullish on prospects and expect the company to gain more share on the back of new launches, increased distribution presence, and diversified portfolio.