The recently listed Ather Energy is international brokerage house, Nomura’s preferred two-wheeler pick. They are maintaining a Buy recommendation with a target price of Rs 458 per share. This implies 16% upside for the Ather Energy share price. Are you wondering why? How does Ather score over the likes of legacy players like TVS Motor? Though Nomura has a Buy on TVS too, they have listed out the key factors why they prefer Ather.
Nomura pointed out that Ather Energy’s valuation of 3.3x EV/sales is based on the average FY27-FY28 estimated sales outlook. On EV/sales, “Ather trades at 2.6x FY28, in-line with high-growth peers such as TVS,” they added. The brokerage house pointed out that Ather’s “potential medium-term growth trajectory is the highest within our coverage universe.”
Nomura on Ather Energy: The big volume boost
Nomura highlighted that “EVs are likely to drive the next decade of growth for the Indian two-wheeler industry.” They expect “ICE volumes to peak by FY30.” This also coincides with the implementation of the next phase of BSVII emission norms.
Nomura estimates that “EV penetration will rise to 19% by FY30 from 6% in FY25 . Ather is a key play on the vast growth potential in EVs.” According to their estimates, the volumes are set to rise at a CAGR of 41% over FY25-FY28. They expect electric bike volumes in the range of “436000 in FY28”. The other key factor that is set to help the higher sales is that this will be “backed by the doubling of its stores from 350 in March, 2025, the launch of the “EL” platform in FY27, and the “Zenith” motorcycle platform down the line,” they added.
Can Rizta help shore up margins
As per the Ather Energy management, “Rizta ramp-up is helping gain share. The focus on giving customers comfort about EVs will drive penetration,” they added. The Ather management also indicated that more launches by Japanese manufacturers is likely to drive industry penetration even further.
On the margins, the Ather management, as per the Nomura report, has outlined that cost reduction is driven by lower cell prices and value engineering. Other costs will increase on higher marketing and store rollouts.
Ather has added 95 stores in Q1FY26; with the total number of stores aggregating to 446 and the company plans to keep adding more. This is expected to help gain share in markets across North and Central India.
Ather is expected to unveil Ather stack 7 and the “EL” platform on its Community Day on August 30. However, the rare earth shortage may put a spanner in the works and impact seven days of production in Q2FY26, Nomura pointed out.
Q1 earnings – Strong margin performance
A look at Ather Energy’s Q1 performance. The gross margin came in strong at 19.6%, higher than Nomura’s estimates of 18.6%. Ather’s Q1FY26 revenue has come in at Rs 645 crore, up 79% YoY. The company’s expenses/sales dropped to 22.1%, and employee costs/sales were at 18.4%.