Ola Electric Mobility’s shares hit a 20% upper circuit to a record high of Rs 133.80 after HSBC initiated coverage with a “buy” rating and a target price of Rs 140 per share. This recommendation suggests a potential upside of 26% from Wednesday’s closing price.
Strong Post-IPO Performance
Since its debut, Ola Electric’s shares have surged by 75.11% from their IPO price of Rs 76. HSBC’s positive outlook highlights the brokerage’s optimism about Ola Electric’s prospects, despite a cautious stance on the broader electric vehicle (EV) penetration in India.
Optimism Amidst Challenges
HSBC believes Ola Electric is “worth investing in” due to sustained regulatory support, the company’s ability to reduce costs, and the favorable risk-reward ratio in its battery venture.
The brokerage noted that Ola Electric captured 49% of 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.
Risks and Uncertainties
However, HSBC also identified several risks, including the slow pace of EV adoption in India, intense competition, an unpredictable regulatory environment, and risks related to battery manufacturing. These factors could impact Ola Electric’s performance.
What’s The Long-Term Outlook?
Despite these challenges, HSBC remains optimistic about Ola Electric’s long-term prospects. The brokerage expects EV manufacturing costs to decrease significantly by the financial year 2027-2028, while costs for Internal Combustion Engine (ICE) scooters may rise due to stricter emission standards.
HSBC also anticipates success in Ola’s battery venture, which could enable the company to produce batteries at costs comparable to imported ones. In an ideal scenario, Ola could manufacture batteries that meet global standards and reduce costs by $15-$20 per kWh, presenting an upside risk to estimates.
Financial Results and New Launch
On Wednesday, Ola Electric reported a net loss of Rs 347 crore for the quarter, widening from the previous year’s loss. However, the company’s EBITDA loss remained relatively flat at Rs 205 crore, compared to Rs 218 crore last year. Despite this, Ola’s shares recovered from intraday lows to close 2.6% higher at Rs 111.
Additionally, Ola Electric announced its entry into the electric motorcycle segment with the launch of the “Roadster” series, scheduled for Thursday. The new bikes will be priced between Rs 75,000 and Rs 2.5 lakh, further expanding Ola’s EV portfolio.
