Ashok Leyland Reports Record Profit and Aims for 35% Market Share in M&HCV Segment with Strategic Investments

Ashok Leyland posted a record profit in the October-December 2024 quarter, driven by lower input costs and stronger truck demand. The company aims to increase its M&HCV market share to 35% in the next two to three years, with a focus on premium products, cost optimisation, and expanding its service network. Ashok Leyland also turned net debt-free and plans significant investments in its finance and electric vehicle units.

Ashok Leyland Reports Record Profit and Aims for 35% Market Share in M&HCV Segment with Strategic Investments

Ashok Leyland’s CEO, Shenu Agarwal, shared the company’s strategy for improving margins and its outlook for commercial vehicle volumes. The company is focusing on three key areas to boost margins: product premiumisation, cost optimisation, and expanding its service network. By offering premium products, Ashok Leyland has been able to command higher prices. Additionally, cost-cutting measures have improved operational efficiency, and a broader service network has strengthened market presence and pricing power.

In the October-December 2024 quarter, Ashok Leyland reported a margin of 12.8%, up from 12% the previous year, with revenue of ₹9,478 crore and net profit of ₹761 crore. Despite a 3-4% year-on-year decline in commercial vehicle industry volumes, Ashok Leyland saw a recovery in the second quarter and expects positive growth in the first quarter of 2025.

The company aims to increase its market share in the medium and heavy commercial vehicle (M&HCV) segment to 35% in the next two to three years, up from over 30% currently. The M&HCV segment is vital to the company’s revenue, contributing about 65%. Ashok Leyland has laid out a clear roadmap for achieving this goal, including expanding its product portfolio and enhancing its sales and service reach. The company’s market capitalisation is ₹65,631 crore, and its shares have risen by 29% over the past year.

Ashok Leyland reported its highest-ever profit for the October-December 2024 period, surpassing analysts’ expectations. This growth was driven by lower input costs and a resurgence in demand for trucks. The company also became net debt-free as of December 31, with a net cash position of ₹958 crore, compared to a net debt of ₹1,747 crore the previous year.

A key factor contributing to the company’s improved EBITDA margins was a sharp drop in steel prices, which were more than 10% lower year-on-year during the quarter. The company also plans to invest ₹200 crore in its lending unit, Hinduja Leyland Finance, and ₹500 crore in its electric vehicle arm, Optare, which produces electric buses under the Switch brand.

Ashok Leyland maintained a market share of just over 30% in India’s medium and heavy commercial vehicles (MHCV) market for the April-December 2024 period, trailing behind Tata Motors, which holds nearly half of the market. The company aims to achieve a 35% market share in the MHCV space in the medium term.

In the October-December quarter, Ashok Leyland sold 26,838 MHCVs, a slight 1% decrease compared to the previous year but a significant improvement from the preceding quarter. The company also saw a 4-5% year-on-year increase in MHCV industry sales in January, with a positive outlook for February and March.

Ashok Leyland’s exports grew by 33% in the December quarter, reaching 4,151 units, mostly buses. The company is focusing on expanding exports to the Middle Eastern market, particularly the UAE and Saudi Arabia, and is working on trucks with export potential to diversify its offerings beyond buses.

For the quarter, Ashok Leyland posted a revenue of ₹9,479 crore, a 2% year-on-year increase despite a decline in sales volume. Its profit grew by 31% to ₹762 crore, exceeding the ₹665 crore forecast by analysts. EBITDA rose 9% year-on-year to ₹1,211 crore, and EBITDA margin expanded by 76 basis points to 12.8%. The company’s stock gained 7.9% to ₹219.60 on the BSE.