Ola Electric Mobility shares surged over 3 per cent to Rs 106 in morning trade on September 26 after HSBC reiterated its bullish stance with a ‘buy’ call on the pure-play EV two-wheeler company as it sees quite a few growth levers.
With a buy call and target price of Rs 140, the international brokerage has implied an upside potential of 35 per cent from the last closing price of Rs 103 per share on the NSE. The Ola Electric counter is going through a sticky patch, declining 12 per cent this week.
The brokerage found that many of Ola’s service stations are currently overwhelmed with service requests. However, the company is undertaking multiple initiatives to address the situation. The development assumes significance as the Bengaluru-based company receives around 80,000 complaints monthly, overwhelming its service centres, multiple reports claimed.
HSBC believes many of these issues are transitory, though an improvement in service quality is needed before the critical launch of Ola’s electric motorcycles.
To tackle the situation, the newly-listed entity has formed a new service team to manage an increasing number of customer complaints related to service issues, the Mint has reported.
In its earlier rating, HSBC expressed confidence in Ola’s battery venture, expecting it to succeed and produce batteries at costs comparable to imported ones. In an optimistic scenario, the brokerage anticipates Ola could manufacture batteries with global-quality standards and a yield that would be $15 to $20 cheaper per kWh than current rates. “This presents an upside risk to our estimates,” HSBC noted.
HSBC suggests that Ola Electric is “worth investing in” considering the sustained regulatory support, its ability to reduce costs and a positive risk-reward in its battery venture. The brokerage wrote in a note that Ola not only sold 49 percent of all electric two-wheelers in the June quarter, but also aims to build most of the required EV parts in India, including the battery.
Ola Electric leads Indian EV two-wheeler market
A new report by global brokerage Bernstein has revealed that Ola Electric is leading the Indian electric two-wheeler (EV 2W) market in terms of margins and is on a strong path to profitability. The report, which analysed the margin profiles of leading EV manufacturers in India for Q1 FY2025 (except for Ather, which is for FY2024), highlights Ola Electric’s impressive financial performance.
According to Bernstein’s analysis, Ola Electric achieved a gross margin of 18.4 per cent during the analysed period, surpassing competitors like TVS (14 per cent), Bajaj (12.3 per cent), and Ather (7 per cent).
The report attributes Ola Electric’s strong margin performance to several factors:
Aggressive Localisation and Vertical Integration: Ola Electric’s focus on local sourcing and in-house manufacturing has helped reduce costs.
Direct-to-Consumer (D2C) Business Model: By selling directly to consumers, Ola Electric eliminates intermediary costs and gains greater control over pricing.
Access to Government Subsidies: Ola Electric benefits from both the Production Linked Incentive (PLI) scheme and the Faster Adoption and Manufacturing of Electric Vehicles (FAME) subsidies.
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