 | |
- close
- close
|
|
Topic
Top news source/blog that we're missing
Why do you recommend this news source?
|
||
WIKI ANALYSIS
With revenues of Rs 9,178.82 crore, Ashok Leyland (NSE:ASHOKLEY) is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle (M&HCV) segment with a market share of 46% amongst passenger vehicles and a market share of 25% amongst goods carriers.[1]. With passenger transportation options ranging from 18 seaters to 52 seaters, Ashok Leyland is a market leader in terms of volumes in the bus segment.[2] Eight out of ten metro state transport buses in India are from Ashok Leyland.[2]With over 60 million passengers a day, Ashok Leyland buses carry more people than the entire Indian rail network.[2] The company also has a near 98.5% market share in the Marine Diesel Engines Markets in India.[3] Over the past five years the revenues and net profit have grown at average annual growth rate of 26% and 28.5% respectively.
The company has most of its business in India, but in Oct 2006 it announced a bus assembly plant at RAKIA (UAE) to cater to the market in Gulf region.[4] In order to diversify in to light commercial vehicle market in India, the company entered into a joint venture with Nissan Motor Co., for the development,manufacture and distribution of LCV products.[5]The two companies also plan to share each others’ dealer network in India and overseas as an
extension of this partnership.[5]
Business Overview
Ashok Leyland Limited manufactures and sales commercial vehicles, and related components and accessories in India.[6] The company offers various types of buses, trucks, tractors other types of commercial vehicles; engines for industrial, genset, and marine applications; and defense and special vehicles.[6] It also provides a range of spare parts. The company also offers design and engineering services to the automobile, power engineering, and aerospace sectors.[6] In addition, it provides independent testing services and test laboratory consulting for auto original equipment manufacturers and their suppliers.[6]
Ashok Leyland has six manufacturing plants - the mother plant at Ennore near Chennai, two plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the assembly plants at Alwar and Bhandara.[7] The total covered space at these six plants exceeds 450,000 sq m and together employ over 11,500 personnel.[7]The company has a product development facility at Vellivoyalchavadi in the outskirts of Chennai, and an Engine Research and Development facility in Hosur.[7].It is setting up a new Plant in the North Indian state of Uttarakhand at Pant Nagar.[8] The Plant is designed to produce around 40,000 commercial vehicles to cater to the North Indian market taking advantage of the excise duty and other tax concessions.[8]The company has also announced plans to invest around Rs 30 Billion to more then double its vehicle manufacturing capacity from 84000 to 184,000 by 2011.[9]
Business and Financial Metrics
From FY2004 to FY 2008, sales revenues have grown from Rs 3,995.12 crore to Rs 9,178.82 crore, at average annual rate of over 26%.[12] In the same period, net profit grew from Rs 193.58 crore to Rs 469.31 crore by over 28.5% average annual growth rate.[12].In FY2008, due to general economic slowdown, the sales of Ashok Leyland in the quarter ending December fell by 44.5% as compared to the same quarter in FY2007.[11] With the fall in sales, the operating margin fell from 11.5% to 8.3% and the net profit margin fell from 7.03% to 1.87%.[11]. Further in Jan and Feb 2009, the sales dropped 73%[13] and 57%[14] as compared to the same months in 2008. The long term debt to equity ratio has gone up from 0.25 to 0.41 due to investments in capacity expansion.[15] In May 2008, the company announced plans to invest around Rs 30 Billion to more then double its vehicle manufacturing capacity from 84000 to 184,000 by 2011.[9]
Share holding pattern: The promoters namely, Hinduja Group owns 38.61% of Ashok Leyland. Banks financial institutions and Insurance companies own another 16.01%. Franklin India Flexi Cap Fund, Franklin India Prima Plus Fund (G), Templeton India Equity Income Fund (G) and Franklin India Smaller Companies Fund (G) are the mutual funds invested in the firm, with 0.38%, 0.27%,0.25% and 0.15% ownership respectively.[16] The government retains a minor share of 0.08% in the company.[1]
| Entity | Percentage |
|---|---|
| Hinduja Group | 38.61% |
| Banks Fin. Inst. and Insurance | 16.01% |
| Others | 14.03% |
| General public | 14.61% |
| FII's | 8.82 % |
| Private Corporate Bodies | 3.40% |
| NRI's/OCB's/Foreign Others | 1.72% |
| Government | 0.08 % |
Business segments
Medium and heavy commercial vehicles (89.03% of revenues): This segment constitutes of manufacturing and marketing medium and heavy commercial vehicles like buses in passenger vehicles sub-segment and trucks in goods carriers sub-segment. In FY 2008, this segment contributed to Rs 68,819 mn in the revenues of Ashok Leyland.[17] The Company sold a total of 18,198 buses and 57,847 trucks in the Indian market during the fiscal 2007-08.[17] The Company registered market share improvement in the bus segment from 40.69% to 45.48%.[18] But it lost market share in the truck segment from 26.36% to 24.9%, due to production constraints arising out of supply chain bottlenecks.[17][19] The Company sold 7,285 vehicles in the overseas markets during 2007-08 – representing an increase of approximately 21% over the previous year.[17]
Engines and spare parts (10.96% of revenues): In FY2008, this segment contributed Rs 8,472 mn with an increase of 51.55% over the previous year.[17] A total of 12,169 engines were sold, including engines sold under the Leypower brand of generator sets, a new line of business being pursued by the Company.[20]The engines sub-segment contributed Rs 1,921mn to the revenues, a 59% growth over the previous year level of Rs 1,210 mn.[17] During the year the Company also offered factory built genset engines, which accounted for 17% of total engine volume.[20] Spare Parts sales grew by 50% over the previous year and contributed Rs 6,551 mn to the revenues. In addition, spare parts sales in the form of knocked down kits to Indian defense establishment contributed to Rs. 685 million during 2007-08, registering a growth of 45%.[20] This segment has shown a growth of over 50% because of the focus of the company to increase the revenues from this business as it is non-cyclical in nature. The company sees it as an option to insulate itself from the cyclical changes in the economy.[21]
Key Trends and Forces
Economic slowdown resulting in adverse impact on the sales
Automobile industry is a cyclical industry. It is substantially affected by general economic conditions. The demand is influenced by factors including the growth rate of the economy, easy availability of credit, increase in disposable income, interest rates, freight rates and oil prices.[22] Lack of vehicle finance availability, lower growth on GDP and/or increases in fuel prices lead to a decline in the demand for automobiles. The Indian economy has shown a sharp decline in GDP from 7.1% in the 2nd quarter of FY2008-09 to 5.3% in 3rd quarter of FY2008-09.[23] The decrease in freight rates due to slowdown of economy also leads to decrease in demand for commercial vehicles as expansion of fleet size is stopped. The freight rates dropped by 9.4% in 2008.[24] Despite the 62% decline in the international gasoline prices, the gasoline prices have dropped by only 10% in India.[25] All this factors have affected the sales of Ashok Leyland. In Feb 2009, the sales dropped 57% as compared to that of Feb 2008.[26]
Raw material price fluctuations directly affect the operating margin and net profit margin
Raw material costs comprises of about 76% of the price of the finished products.[29] Any price increase of the raw materials have a direct bearing on the overall operating margin. As can be seen from the Amex steel index and the world steel price index, there is high degree of volatility in the steel prices. This volatility not only affects the operating margin but also the inventory management of the steel required for production.[30] In August 2008 steel prices peaked to over 1100$/tonne 40% higher then the steel price in January 2008.[31] Whereas on the other hand in March 2009, the steel prices have fallen to 4 year low of $473/tonne.[32] Tyres are also an important part of the raw material required for manufacturing. Tyre prices are correlated to the rubber prices. The chart above shows the volatility present in the rubber market. The rubber volatility also affects the operating margin and consequently the net profit margin.
Development of the rail network resulting in adverse impact on the sales
Development of Indian rail network and the freight rates has a direct impact on the sales of Medium and heavy commercial vehicles used for long haul. On October 5, 2006 Indian railways began the work of the Railway Freight Corridor.[33] The project plan is to connect all the major cities in India with special track capable of carrying double decker wagon freight trains with greater axle load of 30 tonnes per wagon, each train having around 200 wagons and a speed of 150 km/hr.[34] Successful completion of the project would increase the freight carrying capacity of Indian railways by 78%[35] This would adversely affect the sales of medium and heavy commercial vehicles. On 10th February, 2009 the work on the first phase of eastern freight corridor commenced. The work on the western freight corridor is planned to start in March 2009.[36] The entire project is planned to be completed by Dec 2014.[37]
Competition
- Tata Motors -Based in Mumbai, India, Tata Motors Limited is a part of Tata Group. It manufactures commercial and passenger vehicles primarily in India. It offers passenger cars, multi-utility vehicles, and pick-ups; medium and heavy commercial vehicles, such as rigid trucks, tractor trailers, and tippers; intermediate, light, and small commercial trucks; buses; and defense related vehicles. The company, through its subsidiaries, also provide engineering and automotive products; manufacture of construction equipment; automotive vehicle components manufacturing and supply chain activities; and provision of machine tools and factory automation products, as well as offers high-precision tooling, and plastic and electronic components for automotive and computer applications. In addition, it provides automotive retailing and services, as well as financing for the vehicles sold by the company. The company markets its products in Europe, Africa, the Middle East, south Asia, south east Asia, and Australia.[38]
- Eicher Motors (EICHERMOT.EQ-IN) -Headquartered in New Delhi, Eicher Motors Limited manufactures and markets trucks, buses, motorcycles, automotive gears, and components in India. It operates in four segments: Commercial Vehicles, Two Wheelers, Components, and Others. The Commercial Vehicles segment offers CNG trucks, cruiser buses, buses on HCB platform, and tippers. The Two Wheelers segment provides motorcycles and bikes. The Components segment offers gears, gear boxes, construction and earthmoving equipment, and forklifts. The Others segment provides engineering products to automotive, aerospace, heavy engineering, consumer durables, power generation, and other segments. Eicher Motors has a joint venture agreement with Volvo AB.[39]
- Swaraj Mazda (SWARAJMAZD-BY) -Headquartered in Chandigarh, India, Swaraj Mazda Limited manufactures and sells light commercial vehicles for goods and passenger applications in India. The company also offers specialty vehicles, such as ambulances, dumper placers, water tankers, and troop carriers. In addition, it sells spare parts and scrap. It operates as a subsidiary of Sumitomo Corporation.[40]
- Force Motors (FORCEMOT-BY) -The Group's principal activity is to manufacture and market utility and light commercial vehicles, agricultural tractors and diesel engines. Its plant are located at Bombay Pune road, Akurdi, Pune and Pithampur, District Dhar, Madhya Pradesh.[41] With technical collaboration of MAN AG, Germany, Force Motors has a range of heavy commercial vehicles with a payload capacity ranging from 16 to 50 tonnes.[42]
Financial Comparison of the competitors:
| Financial metrics FY2008 | |||
|---|---|---|---|
| Name | Revenue in Rs Crore | Net Profit Margin | Operating Margin |
| Tata Motors[43] | 28,738 | 6.96% | 10.44% |
| Ashok Leyland[44] | 7,729 | 5.83% | 10.09% |
| Eicher Motors[45] | 2,218 | 2.81% | 5.85% |
| Swaraj Mazda[46] | 671 | 3.75% | 7.80% |
| Force Motors[47] | 930 | -8.02% | -5.04% |
Market share
References
- ↑ 2.0 2.1 2.2 cartype.com, Ashok Leyland India.
- ↑ Super brands india,ashok leyland
- ↑ the hindu, Ashok Leyland signs MoU with RAKIA
- ↑ 5.0 5.1 domain b, Ashok Leyland, Nissan in joint venture pact to introduce light commercial vehicles in India news
- ↑ 6.0 6.1 6.2 6.3 linkedin, ashok leyland, company profile
- ↑ 7.0 7.1 7.2 ashok leyland, about us, manufacturing plants
- ↑ 8.0 8.1 business standard, ashok leyland, new highlights, New Capacities
- ↑ 9.0 9.1 Auto india, Ashok Leyland planning huge capacity expansion
- ↑ moneycontrol,ashok leyland, annual result
- ↑ 11.0 11.1 11.2 rediff money, ashok leyland, quarterly results
- ↑ 12.0 12.1 rediff money, ashok leyland, profit and loss statement
- ↑ India automotive, Ashok leyland sales down 73% in January 2009
- ↑ thaindian news, Ashok Leyland February sales 57 percent down
- ↑ rediff money, ashok leyland, ratios
- ↑ Money control, Ashok Leyland , MFs invested in Ashok Leyland
- ↑ 17.0 17.1 17.2 17.3 17.4 17.5 Annual report 2007-08,Ashok Leyland – The year in brief
- ↑ Scribd, auto sector report,DBS cholomandalam securities limited, Structure of Indian CV segment,M&HCV – Passenger Carrier
- ↑ Scribd, auto sector report,DBS cholomandalam securities limited, Structure of Indian CV segment, M&HCV – Goods Carrier
- ↑ 20.0 20.1 20.2 Annual report 2007-08,Summary of Profit and Loss Account
- ↑ Business line,Ashok Leyland to focus on growth of non-truck products
- ↑ Tata Motors, SEC filing, Risk associated with Our Business and the Automotive Industry, Page 10
- ↑ Times of India, GDP growth at 6-year low
- ↑ Freight rates begin to fall for World Merchant fleet
- ↑ Indian express, Petrol to go cheaper by Rs 5 from Wednesday
- ↑ India Automotive, Ashok Leyland: Sales down 57% in February 2009, Friday, March 6, 2009
- ↑ steel on the net, MEPS Steel Product Price Levels across 2007 - 2008, Current prices & historic pricing levels.
- ↑ Malaysian rubber board, monthly average prices
- ↑ Business standard, EBIDTA margins decline by 150 bps YoY to 8%
- ↑ One steel, steel and tube holdings limited,chairman's address
- ↑ High Beam, Builders Feel Squeeze as Steel Prices Jump
- ↑ Purchasing, Steel-market prices reflect lack of demand at OEM, service center levels
- ↑ PM lays the foundation stone for the Western Rail Freight Corridor
- ↑ Vedic Instincts, Aspirations : The Indian Railway Freight Corridor
- ↑ Business line, Low-profile Lalu, Speech on Railway Budget
- ↑ Trade chakra, Railway Budget
- ↑ Freight corridor, choice of traction, Motive Power Directorate
- ↑ Linkedin company profile, tata motors
- ↑ Linkedin company profile, Eicher Motors
- ↑ Business week, company snapshot, Swaraj Mazda
- ↑ Wright reports, company profile, Force motors
- ↑ Linkedin company profile, force motors
- ↑ rediff money, maruti suzuki profile
- ↑ Ashok Leyland rediff moneyt
- ↑ Eicher motors rediff moneyt
- ↑ rediff money, Swaraj Mazda
- ↑ rediff money, force motors
| ||||||
|
|
