Ashok Leyland expected to hike prices by 1% in August

Key highlights:

• Management has indicated that it is expected to take another price hike of about 1% in August 2017
• Ashok Leyland already hiked the prices of its vehicles by about 7-10% in April
• The hike in the prices was due to the conversion from BS-III to BS-IV

The country's second largest commercial vehicle (CV) manufacturer Ashok Leyland is expected to increase the prices of its vehicles by about 1% next month. The company's management has indicated that it is expected to take another price hike of about 1% in August 2017.

Ashok Leyland's management in a con-call with analysts suggest that they would take another increase in prices due to the the transition from Bharat Stage-III to Bharat Stage-IV emission norms, according to analysts Jay Kale and Vijay Gyanchandani in an Elara Securties report.

The company had already hiked the prices of its vehicles by about 7-10% in April this year owing to BS-III to BS-IV transition. However, it still appears that the price hike was not enough and may see an additional smaller hike in August.

“Company took a price hike of about 7-10% in April 2017 owing to BS-III to BS-IV transition. Expect to take another price increase of about 1% in August 2017,” said the report.

Ashok Leyland had reported a 9% drop in truck sales during the quarter ended June 2017, which has been partly attributed due to the BS-IV transition and implementation issues of the goods and service tax (GST).

The company's net profit plunged to Rs 111 crore, which is a little less than half than the same quarter a year ago. Ashok Leyland's operating profit was at Rs 306 crore, which is 37% lower than a year ago. It's operating margins plunged into single digits to 7.2% from 11.2% a year ago.

Ashok Leyland in the analysts con-call said that they have already converted and sold either in domestic market or exports about 60-70% of the BS-III engine inventory to BS-IV and aims to convert the remaining in the next 3-4 months.

“The company denied any reports of technical issues in its iEGR technology )used in BS-IV vehicles) as also reports of it producing SCR vehicles in certain regions. Management is of the view that such stories are being planted by competition,” the report said.

The company expects its exports to grow at about 25% in FY18 for MHCV as well as LCVs. While for electric vehicles it said it will at least take 18-24 months for any meaningful orders for electric vehicles from any state government capital cost is elevated at about 5-6 times of normal vehicle.

Ashok Leyland's management has maintained its 10-15% volume growth outlook for FY18 with expectation of volumes improving from August 2017.

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