Ashok Leyland net seen up 18 per cent

Wednesday, July 2 1997

Ashok Leyland net seen up 18 per cent

New Delhi, July 1: Robust sales in commercial vehicles are expected to push up truck maker Ashok Leyland's net profit by about 18 per cent in 1996-97 (April-March) compared with 1995-96, analysts said.

Ashok Leyland is the second largest commercial vehicle manufacturer in the country and is due to announce its annual results on Wednesday, July 2. The company shares are currently trading at a 12-month low of Rs 67.75.

"Ashok Leyland has had good sales this year, with production of trucks climbing by close to 20 per cent," Jardine Fleming auto analyst KN Srinivasan said.

He said that the company's main product line of medium commercial vehicles had done well, and continued to be the driving force behind the company."One of the factors that is expected to keep net profit growth from being higher than 18 per cent is the company's tax burden. With depreciation falling sharply, tax could be 25 per cent higher than last year," Srinivasan said.

Analysts said they expected Ashok Leyland's net profit to be in the region of Rs 135 crore ($37.7 million) in 1996-97 (April-March) from Rs 101 crore in 1995-96.

Sales were expected to touch an average Rs 2500 crore in 1996-97, analysts said. Ashok Leyland's sales for 1996-97 were Rs 2060 crore."A seven percent growth in the economy and the freight constraints of the railways helped Ashok Leyland to increase its sales," said an analyst with a leading French investment company. Analysts expect the company's net profit in 1997-98 to touch Rs 150 crore a growth of less than 15 per cent. Sales would climb faster at an average 20 per cent to reach the Rs 300 crore mark, they maintained.

They said slower net profit growth in 1997-98 could be attributed to the low sales of its cargo line of trucks, and enhanced competition from India's largest truck maker, Telco.Socgen Crosby auto analyst Rohit Rana said:"Competition from Telco will be severe this year, as it plans to launch trucks in the seven-tonne, 14-tonne and35-tonne gross vehicle weight range. Analysts are still waiting for the company's latest product, the cargo line, produced in collaboration with Italian carmaker Fiat's Iveco truck unit, to live up to expectations.