Ashok Leyland Net Income surged on 700% in 2016 and EBITDA Margin increased on 4.3 pp from 10.7% to 15.0%

25 May 2016 • About Ashok Leyland ($AKLD) • By InTwits

Ashok Leyland reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Ashok Leyland is a growth stock: FY2016 revenue growth was 34.7%, 5 year revenue CAGR was 13.1% at FY2016 ROIC 16.4%
EBITDA Margin is quite volatile: 15.0% in FY2016, 10.7% in FY2015, 4.1% in FY2014, 7.0% in FY2013, 9.7% in FY2012
Ashok Leyland has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.4%. At the same time it's a lot of higher than industry average of 1.0%.
CAPEX is quite volatile: 2,119 in FY2016, 2,509 in FY2015, 4,081 in FY2014, 6,492 in FY2013, 6,978 in FY2012
The company has highly profitable business model: ROIC is at 16.4%
It operates with medium-size leverage: Net Debt/EBITDA is 3.1x while industry average is 3.1x

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	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	129,043	124,812	114,867	153,409	206,587	34.7%
SG&A				4,332	5,513	27.2%
EBITDA	12,504	8,765	4,709	16,361	31,003	89.5%
Net Income	5,660	4,337	-1,641	1,339	10,707	699.7%
Balance Sheet
Cash	326	78	1,064	8,990	17,524	94.9%
Short Term Debt	8,045	16,176	30,088	28,505	36,317	27.4%
Long Term Debt	22,934	27,378	54,912	62,194	75,971	22.2%
Cash flow
Capex	6,978	6,492	4,081	2,509	2,119	-15.6%
Ratios
Revenue growth	15.5%	-3.3%	-8.0%	33.6%	34.7%
EBITDA growth	2.1%	-29.9%	-46.3%	247.5%	89.5%
EBITDA Margin	9.7%	7.0%	4.1%	10.7%	15.0%	4.3%
Net Income Margin	4.4%	3.5%	-1.4%	0.9%	5.2%	4.3%
SG&A, % of revenue				2.8%	2.7%	-0.2%
CAPEX, % of revenue	5.4%	5.2%	3.6%	1.6%	1.0%	-0.6%
ROIC	12.2%	5.8%	-0.5%	7.6%	16.4%	8.8%
ROE	13.9%	10.0%	-3.9%	3.2%	22.5%	19.4%
Net Debt/EBITDA	2.5x	5.0x	17.8x	5.0x	3.1x	-1.9x

Revenue and profitability

Ashok Leyland's Revenue surged on 34.7% in FY2016. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.3 pp from 10.7% to 15.0% in FY2016.

SG&A as a % of Revenue showed almost no change in FY2016.

Net Income marign increased on 4.3 pp from 0.87% to 5.2% in FY2016.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 1.0% in FY2016. The company showed decline in CAPEX/Revenue of 4.2 pp from 5.2% in FY2013 to 1.0% in FY2016. For the last three years the average CAPEX/Revenue was 2.1%.

Return on investment

The company operates at high and attractive ROE (22.53%) while ROIC is a bit lower (16.42%). ROIC increased on 8.8 pp from 7.6% to 16.4% in FY2016. ROE surged on 19.4 pp from 3.2% to 22.5% in FY2016.

Leverage (Debt)

Debt level is 3.1x Net Debt / EBITDA and 3.6x Debt / EBITDA. Net Debt / EBITDA dropped on 1.9x from 5.0x to 3.1x in FY2016. Debt jumped on 23.8% in FY2016 while cash jumped on 94.9% in FY2016.

Management team

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

Appendix 1: Peers in Commercial Vehicles

Below we provide Ashok Leyland benchmarking against other companies in Commercial Vehicles industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

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.