Ashok Leyland reports 247% EBITDA growth and 6.6 pp EBITDA Margin growth from 4.1% to 10.7%

12 May 2015 • About Ashok Leyland ($AKLD) • By InTwits

Ashok Leyland reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is quite volatile: 10.7% in FY2015, 4.1% in FY2014, 7.0% in FY2013, 9.7% in FY2012, 11.0% in FY2011
Ashok Leyland has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.8%. At the same time it's a lot of higher than industry average of 1.6%.
CAPEX is quite volatile: 2,509 in FY2015, 4,081 in FY2014, 6,492 in FY2013, 6,978 in FY2012, 3,526 in FY2011
The company has business model with low profitability: ROIC is at 7.6%
It operates with medium-size leverage: Net Debt/EBITDA is 5.0x while industry average is 5.0x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Ashok Leyland ($AKLD) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	111,771	129,043	124,812	114,867	153,409	33.6%
SG&A					4,332
EBITDA	12,244	12,504	8,765	4,709	16,361	247.5%
Net Income	6,313	5,660	4,337	-1,641	1,339	-181.6%
Balance Sheet
Cash	1,795	326	78	1,064	8,990	744.9%
Short Term Debt	2,201	8,045	16,176	30,088	28,505	-5.3%
Long Term Debt	23,481	22,934	27,378	54,912	62,194	13.3%
Cash flow
Capex	3,526	6,978	6,492	4,081	2,509	-38.5%
Ratios
Revenue growth	54.3%	15.5%	-3.3%	-8.0%	33.6%
EBITDA growth	58.7%	2.1%	-29.9%	-46.3%	247.5%
EBITDA Margin	11.0%	9.7%	7.0%	4.1%	10.7%	6.6%
Net Income Margin	5.6%	4.4%	3.5%	-1.4%	0.9%	2.3%
SG&A, % of revenue					2.8%	2.8%
CAPEX, % of revenue	3.2%	5.4%	5.2%	3.6%	1.6%	-1.9%
ROIC	13.6%	12.2%	5.8%	-0.5%	7.6%	8.1%
ROE	16.5%	13.9%	10.0%	-3.9%	3.2%	7.0%
Net Debt/EBITDA	2.0x	2.5x	5.0x	17.8x	5.0x	-12.8x

Revenue and profitability

The company's Revenue surged on 33.6% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 3.2 pp from 0.83% to 4.0% in FY2015.

Net Income marign increased on 2.3 pp from -1.4% to 0.87% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 1.6% in FY2015. The company showed decline in CAPEX/Revenue of 3.8 pp from 5.4% in FY2012 to 1.6% in FY2015. It's average level of CAPEX/Revenue for the last three years was 3.5%.

Return on investment

The company operates at low ROIC (7.57%) and ROE (3.15%). ROIC increased on 8.1 pp from -0.52% to 7.6% in FY2015. ROE increased on 7.0 pp from -3.9% to 3.2% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 5.0x and Debt / EBITDA is 5.5x. Net Debt / EBITDA dropped on 12.8x from 17.8x to 5.0x in FY2015. Debt increased on 6.7% in FY2015 while cash surged on 745% in FY2015.

Management team

The company's CEO Vinod K Dasari is a founder and has spent 7 years at the company. Gopal Mahadevan is a Ashok Leyland's CFO. Gopal Mahadevan has spent 5 years at the company.

Appendix 1: Peers in Commercial Vehicles

Below you can find Ashok Leyland benchmarking vs. other companies in Commercial Vehicles industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Ashok Leyland stock price chart

Ashok Leyland financials

mln.	FY2010	FY2011	FY2012

Revenue	72,447	111,771	129,043
EBITDA	7,714	12,244	12,504
Net income	4,237	6,313	5,660
CAPEX	6,947	3,526	6,978
Debt	28,784	25,683	30,979
Cash	5,189	1,795	325.6

About Ashok Leyland

Ashok Leyland Limited manufactures and sells commercial vehicles in India and internationally. Its products include buses, such as city, sub-urban, inter-city, school and staff, and special buses; trucks for various applications, including long-hauls, distribution, construction, and mining; light vehicles; and defense vehicles, such as rapid intervention vehicles, field artillery tractors, light recovery vehicles, water bowsers, truck fire fighters, and fuel dispensers for the armed forces and other international customers. The company also offers power solutions, such as engines that power generator sets, marine applications, earth-moving equipment, compressors, cranes, harvester combines, and others. In addition, it provides crankshafts, gears and shafts, crown wheels and pinions, filters, brake linings, clutch plates and pressure, face plates, cylinder liners, pistons and rings, hubs and brake-drums, thinwall bearings, ball and roller bearings, gasket kits, trailer axle assemblies, king pin kits and tie rod end kits, water pump assemblies and kits, oil pump assemblies, and engine and gear oils. The company was founded in 1948 and is headquartered in Chennai, India. Ashok Leyland Limited is a subsidiary of Hinduja Automotive Limited.