Earnings Call Transcript Analysis Report #
Financial Performance #
Key Financial Metrics (Q3 FY25) #
- Revenue: All-time high Q3 revenue of Rs. 9,479 crores (YoY Rs. 9,273 crores in Q3FY24).
- Net Profit: Jumped 31% YoY to Rs. 762 crores.
- EBITDA: Record for Q3 at Rs. 1,211 crore.
- EBITDA Margin: Improved to 12.8% (from 11.6% in Q2 FY25 and 12.0% in Q3 FY24).
- Operating PBT: Rs. 994 crore, higher by 10% YoY.
- Material Cost: As a percentage of revenue was 71.5% (lower than 72.2% in Q3 FY24).
- Net Cash Position: Positive at Rs. 958 crore at end of Q3 FY25 (compared to net debt of Rs. 1,747 crore at end of Q3 FY24). This is before the announced Rs. 700 crore investments.
- CAPEX: Rs. 179 crores for Q3 FY25; Rs. 486 crores cumulative for 9M FY25.
- Average Selling Price (ASP): Console level ASP up 4% YoY in Q3 FY25.
Comparison with Previous Periods #
- EBITDA margin improved sequentially from 11.6% (Q2 FY25) and YoY from 12.0% (Q3 FY24).
- Net profit up 31% YoY.
- MHCV TIV sequentially up 10% in Q3 FY25 from Q2 FY25, though down 1% YoY. This is an improvement from Q2 FY25’s YoY degrowth of 12%.
Revised Guidance or Forecasts #
- No specific revised numerical guidance for overall FY25 was given, but management expressed positive sentiment for Q4 and FY26.
Areas of Growth or Decline #
- Growth:
- Net Profit (31% YoY).
- EBITDA & EBITDA Margin.
- Export Volumes (33% YoY in Q3; 19% YoY for 9M FY25).
- Non-CV Businesses: Engine volume (3.5% YoY), Spare parts revenue (14% YoY).
- Hinduja Leyland Finance AUM (26% YoY), Hinduja Housing Finance AUM (43% YoY).
- MHCV Bus Volume (5% YoY).
- Decline:
- Domestic MHCV Volume (1% YoY, in line with industry).
- Domestic MHCV Trucks Volume (2% YoY).
- LCV Domestic Volume (9% YoY).
- Defense Revenue (Q3 Rs. 100 cr vs Q2 Rs. 150 cr, though outlook is strong).
Strategic Initiatives & Business Updates #
Major Strategic Announcements #
- Focus on “profitable and sustainable growth through levers of product premiumization, cost leadership, and expansion of service reach.”
- Investment approval: Rs. 200 crores in Hinduja Leyland Finance and Rs. 500 crores in Optare (holding company of Switch).
- Reverse merger of Hinduja Leyland Finance with NDL Ventures is on track, likely to conclude by end of Q1FY26.
- Evaluating options for Switch UK due to uncertain market outlook, while focusing on India and Europe for Switch.
New Products, Services, or Markets Discussed #
- LCV: Launched “Saathi,” first offering in the entry-level mini truck market. Aiming to expand LCV market coverage from 50% to 80%.
- EV:
- Switch Mobility unwheeled “Switch EiV12,” a low-floor electric bus for India.
- Switch eLCVs gaining momentum, monthly run rate over 100 numbers.
- First few units of “E1 buses” from Switch (for European market) delivered to Spain.
- Concepts (for commercial production in 9-12 months):
- India’s first concept of an electric-port terminal tractor.
- India’s first 15-meter bus with air suspension, front engine, 42 sleeper beds.
- Switch displayed a concept electric truck in the 7.5 ton GVW range.
- Service: Expansion of touchpoints (1,000 MHCV, 800 LCV). Launched multiple initiatives to enhance customer experience, workshop operations, and breakdown support, backed by analytics and AI.
Significant Operational Changes #
- Continued focus on material cost savings.
- Enhanced cost monitoring mechanism for other expenses.
- ESG: Ranked #1 globally in heavy machinery and trucks by Sustainalytics. RE100 progress from 61% (FY24) to 68%.
Ongoing or Completed Projects #
- Medium-term goals:
- Achieve mid-teen EBITDA.
- Achieve MHCV market share of 35%.
- Substantial growth in non-MHCV businesses.
- Leadership in alternate fuel vehicles.
- Value unlocking from subsidiaries.
- Leadership in ESG.
Market & Competitive Landscape #
Insights about Industry Trends #
- MHCV industry: Slowed in Q2 FY25 (-12% YoY), gained strength in Q3 FY25 (-1% YoY, +10% sequentially from Q2). January 2025 recorded positive industry growth.
- LCV market: Ashok Leyland’s LCV domestic volume down 9% YoY.
- Electric Bus Market: Expected to grow in India, but UK outlook is uncertain. Europe offers good potential.
- Replacement Demand: Expected to be strong due to high average fleet age.
- Shift from individual buyers to fleets is a gradual trend.
- Quick commerce growth seen as positive for LCV and ICV segments.
Competitive Positioning Statements #
- MHCV: “Ashok Leyland continues to retain 30% plus market share in domestic MHCV market. Our nine-month ended December 24 market share stood at 30.4%.”
- LCV: “In the addressable 2 to 4 ton market, AL market share was 18.5%. With the launch of Saathi, we are committed to improve our market share to 20% in the short term and 25% in the medium term.”
- Buses: Market share over 38%.
- Pricing Discipline: “Actually in January, we have been able to improve both on the pricing and slightly on the mix as well.”
Market Challenges or Opportunities Mentioned #
- Challenges:
- Uncertainty in the UK electric bus market.
- Past gaps in tipper range (now addressed).
- Increased cost of vehicles leading to longer loan tenures, potentially slowing replacement cycles.
- Opportunities:
- Growth in Indian electric bus market for Switch India.
- European EV bus market for Switch (E1 bus).
- GCC market potential for new E1 bus.
- Strong export order book for Q4.
- Pent-up demand in the bus segment.
- Defense business pipeline is “really very strong.”
- Expansion in LCV market segments (from 50% to 80% coverage).
- Growth in tipper and multi-axle vehicle segments due to product gap closure and better margins.
- Favorable Union Budget FY26 focus on consumption and infrastructure.
Comments about Market Share or Positioning #
- MHCV: Retain 30%+; goal of 35% in medium term.
- LCV (2-4 ton): Current 18.5%; goal of 20% short term, 25% medium term with Saathi and future products.
- Tippers: Current market share around 23%, aiming to