OLA Electric stock spikes 16% as company enters electric motorcycle segment

Shares of Ola Electric Mobility, the leading two-wheeler electric manufacturer in India, continued their upward momentum following their market debut. In today's early morning trade, the stock surged another 16%, reaching ₹128.30 per share. This spike comes just a day after the company expanded into the two-wheeler motorcycle segment, unveiling three electric bike models—Roadster Pro, Roadster, and Roadster X with prices starting from ₹74,999, ₹1,04,999, and ₹1,99,999, respectively.

The company also showcased the indigenously developed Bharat 4680 cell and battery pack, new Gen-3 platform, and MoveOS 5 at Sankalp 2024, Ola’s annual launch event, at its Future factory in Krishnagiri, Tamil Nadu, on August 15, 2024.

At the event, Bhavish Aggarwal, Founder and CMD of Ola Electric, stated, “Currently, motorcycles make up two-thirds of India’s two-wheeler market. With Ola’s entry into this segment, the penetration of electric vehicles (EVs) in the two-wheeler market is set to accelerate even further."

He highlighted the company's success in driving EV adoption within the scooter segment and emphasised that, with Ola's innovative product lineup, they are now focused on significantly boosting EV penetration through their motorcycle offerings.

Aggarwal added, “With the integration of our cells into our vehicles starting early next year, we are committed to paving the way for widespread EV adoption across India.”

Market share expanded

The company boosted its market share during the June quarter, solidifying its position as the leading electric 2W manufacture in the country. In April, Ola Electric reduced prices for its most affordable scooter model to stimulate demand after the government reduced EV subsidies. However, these discounts affected the company's bottom line figures in the June quarter, with the company reporting a consolidated net loss of ₹347 crore for Q1 FY25, compared to a loss of ₹267 crore in the same period last year.

Looking at the top level, the revenue from operations for the quarter spiked up sharply to ₹1,644 crore, up from ₹1,243 crore in the corresponding quarter of the previous fiscal, driven by the sharp jump up in sales.

June witnessed the highest-ever deliveries of vehicles by the company at 1,25,198 units as against 70,575 units delivered in the same period last year, Ola Electric Mobility said. Aggarwal said that Ola Electrics' market share during the quarter touched a record 49%.

Close to EBITDA breakeven

The company said it ramped up deliveries of its mass-market scooter portfolio (S1 X portfolio) during the quarter, which helped accelerate growth. The existing product portfolio (S1 Pro, S1 Air, and S1 X+) also saw strong demand, which continued growth momentum throughout the quarter, it added.

The company’s automotive segment (E2W) posted a strong improvement in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin and is close to EBITDA breakeven. The EBITDA margin losses narrowed to 1.97% from 8.29%.

The increasing scale of operations has benefited the company in the form of lower manufacturing costs and supply chain optimisations. These benefits of scale are further amplified by the company’s scalable platform-based product development and manufacturing technology, which results in high degrees of commonality across its products, as per the company's exchange filing.

OLA is worth investing, says HSBC Securities

Global brokerage firm, HSBC Securities and Capital Markets (India) has initiated coverage on OLA Electric with a target price of ₹140 per share. The brokerage is optimistic about the company's efforts to produce key EV components, particularly batteries, domestically. HSBC believes that OLA Electric's go-to-market strategy and localization efforts could attract investors interested in the electrification trend in India.

However, the brokerage notes that adoption of EVs remains slow, competition is anticipated to be intense, and regulatory support is uncertain. Additionally, there are risks related to battery manufacturing.

Despite these challenges, HSBC sees a favorable risk-reward profile for OLA Electric. Key factors contributing to this outlook include potential reductions in the bill of materials (BOM) for EVs compared to internal combustion engine (ICE) scooters, decreasing adoption friction, and the possibility of a successful battery venture for OLA.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.