By Suresh Seshadri
MADRAS, India, July 25 (Reuters) - Indian automaker Ashok Leyland Ltd will post a profit for the first quarter against a loss in the period a year ago, boosted by stronger sales especially to the high-margin defence sector, analysts said on Thursday.
The Indian flagship of the U.K.-based billionaire Hinduja brothers, the company is the country's second-largest maker of trucks and buses. It reports the April-June results on Friday.
Five analysts surveyed by Reuters projected a median net profit of 67 million rupees ($1.38 million), with the estimates ranging from 51.6 million to 97.5 million rupees. The loss in the corresponding quarter last year was 94.04 million rupees.
Net sales of the Madras-based Ashok Leyland was estimated at a medium 6.11 billion rupees, up 21.5 percent from a year ago.
Sales by volume grew 19.2 percent to 7,681 vehicles in the past quarter, from 6,446 in the year-earlier.
Pramod Amthe, auto analyst at Cholamandalam Securities, said earnings would have been boosted by higher sales to the Indian army, which fetches better prices but are not disclosed separately.
"The operating margin has improved 320 basis points to about 10 percent," he said, adding improved operational efficiencies would have also helped.
S Krishnakumar, vice-president at Madras-based Anush Shares and Securities, said the net profit would be tempered by an increase in labour-related expenses such as settlement packages for employees under a voluntary retirement scheme.
"The retirement scheme should add about 20 million rupees in additional expenditure per quarter for the year," he said.
Krishnakumar, who holds a long-term "outperform" rating on the stock, said the share was trading at about nine times its 2002/2003 earnings forecast of 11 rupees per share, lending it "good potential for upside".
Ashok Leyland's shares were up 1.18 percent at 102.55 rupees in morning trade on the Bombay exchange, whose main index was up 0.83 percent at that point.
The shares ar up 60 percent from a 2002 low of 64.10 rupees hit in January, but still 13.1 percent adrift of the year's high of 118 rupees reached last month.
(US$1=48.69 rupees)