Shares of Ola Electric Mobility touched a 20 per cent upper circuit to touch a record high of Rs 133.80 on Friday after HSBC initiated coverage with a “buy” rating and the company reported its quarterly results on Wednesday.
HSBC’s recommendation with a target price of Rs 140 suggests a potential upside of 26 per cent from Wednesday’s price.
Since its debut last week, Ola Electric’s shares have surged over 75 per cent from their issue price of Rs 76.
At 01:50 PM on Friday, the Bhavish Aggarwal-led EV manufacturer’s shares were trading at Rs 133.08, up 22.18 points or 20 per cent from Wednesday’s closing price.
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Despite a conservative stance on broader EV penetration in India along with other uncertainties, the brokerage firm believes Ola Electric is “worth investing in” due to sustained regulatory support, the company’s ability to reduce costs, and the favourable risk-reward ratio in its battery venture.
HSBC highlighted that Ola Electric gained 49 per cent market share in the electric-two wheeler market in the June quarter and emphasized the company’s goal to produce most EV components, including batteries, domestically. This domestic focus could differentiate Ola in the competitive EV market, according to the brokerage.
However, HSBC cautioned that factors including the slow pace of EV penetration in India, intense competition, unpredictable regulatory support and batter manufacturing risks could impact Ola Electric’s performance.
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The brokerage firm remains optimistic about the company’s long-term prospects and expects EV manufacturing costs to decrease sharply by fiscal 2027-28. However, costs for Internal Combustion Engine (ICE) scooters may increase due to stricter emission standards.
HSBC also anticipates success for Ola’s battery venture, which could enable it to manufacture batteries at the same price as those of imported batteries. It expects Ola to make batteries at a global quality and a yield level that costs around $15-20 lower per KWH. "This is an upside risk to our estimates," the brokerage said in its note.
In the April-June 2024 quarter, Ola Electric’s net loss widened to Rs 347 crore compared to Rs 267 crore in the year-ago period. Its revenue increased by 32.3 per cent YoY to Rs 1,644 crore from Rs 1,243 crore in the corresponding quarter of previous financial year.
The net loss widened due to an increase in finance costs, which nearly doubled to Rs 67 crore as against Rs 37 crore last year. Also, an increase in overall expenses to Rs 1,849 crore from Rs 1,461 crore last year contributed to losses.
In addition, Ola Electric announced a foray into the electric motorcycle segment with the launch of the “Roadster” series on Thursday. The bikes will be priced in the range of Rs 75,000 to Rs 2.5 lakh.
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