India's Ashok Leyland, part of the Hinduja Group, reported a strong first-quarter profit that surpassed analysts' expectations, driven by improved margins. The standalone profit for the company rose by 13% to 5.94 billion rupees ($67.86 million) for the quarter ending June 30, outperforming the average estimate of 5.70 billion rupees, according to data compiled by LSEG. Revenue from operations also saw a slight increase of 1.5% to 87.25 billion rupees, matching analysts' predictions.
A notable highlight for Ashok Leyland was a 12% increase in the sales of its higher-margin buses, which are part of its medium and heavy commercial vehicle (M&HCV) segment. This boost in sales contributed to the company's improved financial performance in the quarter. Following the release of the positive results, shares of Ashok Leyland surged as much as 3.6% initially before settling at a 1.4% increase in trading.
Analysts attributed the company's enhanced margins to a combination of factors, including a favorable net pricing structure and effective internal cost control measures. Despite a minor rise in steel prices, Ashok Leyland was able to maintain healthy margins, which rose to 6.81% from 6.11% compared to the previous year.
The demand for M&HCV buses also played a significant role in driving Ashok Leyland's performance in the quarter. Increased orders for public transport buses, the replacement of older fleets, and government initiatives aimed at improving urban public transport systems all contributed to the uptick in sales for the company.
In comparison to its peers in the industry, Ashok Leyland outperformed rivals like Mahindra & Mahindra, Eicher Motors, and Tata Motors in terms of quarterly profit. While Mahindra & Mahindra and Eicher Motors beat profit estimates due to strong demand for SUVs and motorcycles respectively, Tata Motors saw a decline in profit due to tariffs and slow sales.
Overall, Ashok Leyland's positive financial results for the first quarter reflect a resilient performance in a challenging economic environment, showcasing the company's ability to adapt to market conditions and deliver strong profitability.
