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Ashok Leyland - Margins outlook remain subdued - ICICI Securities Posted On: 2021-02-15 20:45:50 (Time Zone: Arizona, USA) Ashok Leyland s (AL) operating performance in Q3FY21 was below consensus estimates as EBITDA margin came in at 5.3%. Gross margins eroded ~321bps QoQ to 25.6% due to deterioration in mix (M&HCV revenue share rose 11% QoQ to ~56%). Management indicated: a) economic activity resumption has been stronger on infrastructure side which has aided tipper/ multi-axle segment; b) commodity prices are likely to further stiffen in Q4 and price increases are unlikely to cover for these increases; and c) nature (voluntary/mandatory) of scrappage policy remains key for demand creation. We estimate volume rebound at ~35% CAGR in FY21E-FY23E, which we reckon, will raise asset efficiencies, margins for AL leading to healthy FCF generation (~Rs30bn cumulative FCF in FY22E/23E) assuming subdued capex intensity. Maintain HOLD. ....