Ashok Leyland: Sharply lower EBITDA margin is a matter of concern
Moneylife Digital Team 13 May 2013

During the quarter, there was an exceptional gain for Ashok Leyland of Rs1.34 billion mainly on sales of IndusInd shares. The company reported an EBITDA margin of 5.3% for the March quarter below Nomura's expectation of 10.9%

 
Ashok Leyland declared adjusted net profit of Rs157 million for the March 2013 quarter, significantly below Nomura’s expectations. Margins came in at 5.3% compared to Nomura’s expectation of 10.9% due to higher raw materials/sales and higher other expenditure. Raw materials/sales increased by around 400bps quarter-on-quarter to 75.8% (Nomura’s estimate was 72%). Other expenses/ sales came in at 11.4% versus Nomura’s expectation of 9.6%.
 
Sharply lower EBITDA margin is a matter of concern, according to Nomura’s analysts, as it could mean that Ashok Leyland has been reporting better volumes than Tata Motors through higher discounting and advertisement and promotion spending.  During the quarter, the company reported an EBITDA margin of 5.3%, compared with Nomura's estimate of 10.9%
 
During the quarter, there was an exceptional gain of Rs1.34 billion mainly on sales of IndusInd shares, point out Nomura’s analysts.
 
The performance of Ashok Leyland in FY13 is given in the table below:
 
 
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