Shares of Ashok Leyland dipped 9 per cent to Rs 108 on BSE in the early morning trade after Vinod K Dasari has quit as Managing Director and Chief Executive Officer of the company, effective March 31, 2019. The stock was trading close to its 52-week low of Rs 103, touched on October 5, 2018 in the intra-day trade.
“After a successful stint of almost 14 years with Ashok Leyland, first as a Chief Operating Officer (COO) and then as CEO and MD, Vinod K. Dasari has decided to pursue his personal interests and seek new learning. Respecting his personal decision, the board in its meeting today accepted his resignation. Dasari will continue to work in the current position until 31 March 2019, to ensure a smooth transition,” Ashok Leyland said in a press release on Tuesday, November 13, 2018.
To assist in business continuity and a seamless transition, the board has requested Dheeraj Hinduja to step in as Executive Chairman (EC) with immediate effect, it added.
Meanwhile, Ashok Leyland reported a 37 per cent year-on-year (Y-o-Y) jump in its net profit at Rs 4.60 billion in September quarter (Q2FY19), on back of 25 per cent Y-o-Y growth in revenue at Rs 76.08 billion. Ebitda (earnings before interest, tax, depreciation and amortization) margin improved to 10.6 per cent in Q2FY19 from 10.1 per cent in the same period last year. The company said it has posted consistent operating margins, despite market volatility, with double-digit EBITDA margins in 14 of the past 15 quarters.
Analysts at Antique Stock Broking believes Ashok Leyland is primed to benefit from commercial vehicles (CV) industry growth thrust, with new industry peak on cards in FY20, led by pre-buying ahead of BSVI. Additionally, infrastructure push before election year and faster replacement cycle of construction linked trucks would continue to support CV demand over the next couple of years.
“We have forecast a volume growth CAGR of 4 per cent over FY18-21e, factoring a dip in the volumes post FY20 due to pre-buying in previous year. Nonetheless, we also think mandatory vehicle scrappage policy (if at all this comes with BSVI) and continued steam in construction activities may prevent the industry volume falling off the cliff in FY21e. We also believe that the management's endeavor to fill the product gaps in the ICV/LCV segments, digital Initiatives to increase wallet share over vehicle life cycle and initiatives to enhance the export pie to around 33% of the business would evolve meaningfully in long run only,” the brokerage firm said in a result review.
Meanwhile, leadership change uncertainty may weigh on the stock price performance in the short-term, despite robust operational outlook, it added. The brokerage firm has ‘buy’ rating on the stock with a 12-month target price of Rs 148 per share.
At 09:39 am, the stock was down 8 per cent at Rs 110 on the BSE, as compared to 0.16 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 28.13 million equity shares changed hands on the BSE and NSE so far.