Ashok Leyland tanks 22% in 1 week on margin concerns; hits 15-month low

The company's raw material costs in Q3 rose to 77.9 per cent of sales, up 120 bps quarter-on-quarter

Shares of Ashok Leyland hit a 15-month low of Rs 93.20, slipping 6 per cent on the BSE in Tuesday's intra-day trade, on margin concerns due to rising raw material costs. In the process, the stock of the commercial vehicle maker hit its lowest level since December 2020.

In the past one week, the market price of Ashok Leyland has dipped 22 per cent as compared to a 6 per cent fall in the S&P BSE Sensex. Moreovr, in the past one month, it has tanked 30 per cent, as against a 9 per cent decline in the benchmark index.

For October-December quarter (Q3FY22), Ashok Leyland reported 123 basis points year-on-year decline in its earnings before interest tax and depreciation and amortization (ebitda) margins at 4 per cent due to higher raw material costs. The company's raw material costs in Q3 also increased to 77.9 per cent of sales, up 120 bps quarter-on-quarter.

The sharp rally in commodity prices due to the geopolitical events in Ukraine and its impact on margins, higher cost of ownership, muted volumes and supply shortages are the key triggers for the decline in auto stocks, Business Standard reported. CLICK HERE FOR FULL REPORT

That said, the demand for medium and heavy commercial vehicle (MHCV) is expected to remain strong on the back of a low base, replacement demand, announcement of scrappage policy, pickup in construction & mining and increased infrastructural spending, according to Prabhudas Lilladher. 

"Ashok Leyland's electric vehicle (EV) business has been transferred to Switch Mobility. Switch UK has announced setting up of a manufacturing facility in Spain and it plans to invest EUR 100mn over the next decade. Currently, it is looking to raise USD 200mn of which USD 100mn funding is for immediate capex. In India, the current capacity for buses is ~500 units p.a. and in UK it is ~250 units p.a," the brokerage firm said in Q3 result update.