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Ashok Leyland bags Rs100cr defence order for rocket-carrying vehicles, stock up 3%

One of India’s largest commercial vehicle (CV) manufacturers, Ashok Leyland Limited (ALL) has bagged an order from the Ministry of Defence worth Rs100cr. The order is for supplying ALL’s High Mobility 10×10 vehicles (HMV 10×10). The HMV 10×10 is used by the Indian Army for carrying Smerch Rockets.

Despite heavy discounting for CVs, its EBITDA margin expanded 100bps yoy to 11.1% in Q3FY18 due to superior product mix and BS-IV migration. ALL will invest Rs400cr in a new LCV platform to launch a new product every six months. It has retained profitability (EBITDA margin >10%) in recent times, even at the cost of some market share loss (from 44% in FY16 to 33% currently). ALL is the third largest manufacturer of commercial vehicles (trucks, buses, tippers, trailers and defence vehicles) in India with 33% market share (Q3FY18). It is also engaged in the manufacturing and selling of engines for industrial and marine applications, spare parts and special alloy castings. ALL has a combined capacity of 1.5 lakh vehicles across six manufacturing facilities — three in Tamil Nadu, and one each in Maharashtra, Rajasthan and Uttarakhand. ALL beat its FY18E M&HCV volume guidance of 5-10% by growing 16% yoy in FY18.

Ashok Leyland Ltd is currently trading at Rs149.15, up by Rs4.25 or 2.93% from its previous closing of Rs144.90 on the BSE.

The scrip opened at Rs145.10 and has touched a high and low of Rs149.65 and Rs145.10, respectively. So far 82,15,690 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs42,467.74cr.