Chennai, Jan 24: Ashok Leyland Ltd is seen posting a healthy net profit in the third quarter of 1999-2000, driven by a continuing surge in sales volumes, analysts said on Monday. ``They should post a healthy profit of about Rs 22-24 crore in the third quarter, as they have sold about 700 vehicles more than in the second quarter,'' said R Satish, auto analyst at Sundaram Newton Asset Management Co Ltd.Ashok Leyland posted a profit of Rs 18.19 crore in the second quarter, on sales of 8,740 vehicles. It sold 9,478 in the third quarter - an increase of 8.4 per cent.
The firm, part of the UK-based non-resident Indian Hinduja group, posted a net loss of Rs 13.08 crore in the corresponding year-ago quarter. The firm releases its results on Tuesday.
Its shares have risen nearly 30 per cent in the past six weeks. They ended Monday at Rs 137.10 at the Bombay Stock Exchange.
Industry data released last week showed the firm's sales rose by 24,928 vehicles during the April-December period from 18,443 in theyear-ago period. Analysts said the firm's truck sales had continued to grow in the third quarter, helped by pent-up replacement demand from truck and bus operators, seeking to modernise their fleets and comply with legislative changes on emission norms and vehicle age.
``With the industry coming out of a long recession, there is a lot of replacement demand, with bus operators also opting to modernise their aging fleet,'' Satish said.
``Besides replacement, the other drivers appear to be the return of the feel good factor and the resultant buying by industry and large fleet operators and also the provision on phasing out vehicles older than 15 years,'' said KC Ganesh, analyst at Carlson Investments.
Analysts said the firm's improving cost efficiencies were also a factor that would help boost margins.
``The margins improved in the second quarter compared to the first quarter and given the improved economies of scale the profits should improve too,'' Ganesh added.
But Monday's poor showing by its mainrival Tata Electric and Locomotive Co Ltd (Telco) appeared to weigh on the minds of some analysts, who said new costs incurred on low-emission engines could hurt profits. ``What we saw happen at Telco should be true for Ashok Leyland as well and so, how the company is handling the transition of its trucks to Euro-I norms and whether it shows up in the third or fourth quarter could reflect in the profits,'' said Satish.
Earlier on Monday, Telco announced a third quarter loss of Rs 60.36 crore, compared to Rs 21.58 crore in the year-ago period.
Analysts attributed the big jump in losses at the firm, in part, to higher costs incurred in fitting its trucks with cleaner engines.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.