I wrote a DETAILED article talking about the business of Ashok Leyland – here

Pros

• Infrastructure boom – GoI is spending BIG on infrastructural development and that will benefit AL + other CV players. A substantial amount has been earmarked for Capex in the Union Budget (around 10L CRORE) + the Government wants to convert 8 LAKH diesel buses into e-buses over the next 6 years.
• An astute management – AL is part of Hinduja Group which is a high pedigree conglomerate. On the earnings call, the management was very clear about it’s intent – it will NOT sacrifice profits / margins to gain market share but focus on the quality of the product instead. Over the last 10 years, AL has transformed itself from being a south centric player to a pan-India player with strong market share in most regions that it operates in.
• High barriers to entry – CV market is not easy to enter. It requires a lot of capital, and it takes a long time to achieve break-even, so you need deep pockets. No major entrants are expected in the short term.
• Future Growth drivers for AL:
  M&HCV Business – the management believes that the industry is moving towards higher tonnage tractor trailers which has a higher selling price + higher margins. Globally, the penetration of high tonnage tractor trailers is quite heavy and in India it is only 20%. With goods roads that should increase and bode well for AL going forward and should help it expand margins.
  LCV Business – LCV business has higher margins compared to M&HCV. Is less cyclical. And the current product portfolio addresses only 40-45% of the market, which means there is more room to grow and more variants that AL can launch in the future.
  Investing in new technologies – AL is investing in EVs (through it’s step down subsidiary Switch Mobility), and in hydrogen fuel cells, hydrogen ICEs. In EVs, via Switch Mobility – it recently unveiled it’s e-LCVs which already has a pre-booking of 13,000 units. In e-buses, it has an order book of 1300+ e-buses. AL is also getting ready to launch electric trucks very soon.

Cons

• Cyclical industry – the growth in CVs is a factor of the growth in the economy, Any slowdown in the economy would adversely effect this industry and it is quite cyclical.
• High competition – even though the barriers of entry are quite high, existing players are quite BIG and very competitive. Tata Motors is the largest CV player in India.
• Commodity prices – the business is heavily dependent on commodity prices, especially steel. Although AL has been able to pass on increase in commodity prices to end customers, in a highly competitive scenario this might not always be possible
• High Debt – There is a significant debt on the books of AL, primarily because of the financing subsidiary (HLFL). However, investors should keep tabs on this # to ensure it doesn’t balloon out of control.
• No FY25 guidance – in the Q3 earnings call, no forecast was given by the management on estimated deliveries / revenue #s for FY25.
• Promoter Pledging – the promoters are pledged some of the shareholding, which is a red flag in case the stock price start to drop drastically

Conclusion
I think AL is being valued as a traditional CV company and the future potential in the e-bus / e-LCV / e-Truck segment is not being baked in. That said, it has to prove itself that it can capture a significant portion of the EV market to be able to command a premium valuation.

Disclosure: Not invested, tracking closely – waiting for a 10-15% correction to make a BUY decision.

@lovekesh_thakur realization is a function of product mix as well, like if they sell more hunter or IMFL then blended realization would go up + every year exactly this time of the year they do a price hike of 5% or so so yes it would increase

@sanju.inlv what I can only say on the TAX part is check the historical tax

For united brewries

‘SO we need to figure why it had decreased to 25% suddenly UB did not have any losses as well??

My understanding is top line would grow at 50%++ need to understand bottome line growth. I would wait for time or price correction to re enter as of now does not make sense to me

I think Sona machinery is reasonable valued, ipo money goes to new capex if it’s live then I think it’s go New high

I can only make guess, it’s better we wait for concall.
One more thing i noticed that realisation per case was 488 in Q4 FY23 and it improved to around 560 next quarter. So would they undertake a similar price hike this quarter as well ?

Good numbers. The only problem I see is the lumpiness in their cash collection which can be noticed in uneven and erratic inventory turnover and cash conversion cycles. Reason for that is not surprising given that they work with government entities and their small scale of operations puts them vulnerable to delay in payments, thus impacting financials. Unlike Tatas or Adanis they won’t have leverage or influence on procurement departments of government entities.

Although they claim to have an order book of 2000+ crores, the revenue streams will always be unpredictable as they have been in the past. But short term narrative and earnings look good and one can expect further rally in the stock.