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Shares of Ola Electric, the company led by Bhavish Aggarwal, saw a notable surge of 20% on Friday, reaching Rs 133 during the afternoon trading session. This uptick in the stock price follows positive developments for the electric vehicle (EV) company, including its entry into the two-wheeler market and the release of its June quarter earnings report, which played a significant role in the share price movement.
The recent boost in Ola Electric's share price is partly attributed to the company's impressive performance in the electric two-wheeler market. Ola Electric accounted for 49% of all electric two-wheeler sales during the June quarter, a significant market share that underscores its strong presence in the industry.
Despite the positive share price performance, the company's financial results for the quarter ending June 30, 2024, reveal ongoing challenges. Ola Electric posted a consolidated net loss of Rs 347 crore for the period, representing a nearly 30% increase in losses compared to the Rs 267 crore loss recorded in the same quarter the previous year. The company’s revenue from operations grew by 32.3% year-on-year to Rs 1,644 crore, but its EBITDA loss stood at Rs 205 crore.
In a noteworthy development, HSBC has issued its first "buy" recommendation for Ola Electric, setting a target price of Rs 140 per share. This target suggests a potential upside of 26% from Wednesday's closing levels. HSBC's positive outlook is supported by Ola Electric’s strong market position and growth potential, despite recognizing several risks associated with the investment.
The brokerage’s cautious stance includes concerns about the slow adoption of electric vehicles in India, fierce market competition, and uncertainties related to regulatory support and battery manufacturing. However, HSBC remains optimistic about Ola Electric's future prospects due to ongoing regulatory support, cost reduction initiatives, and the potential success of its battery venture.
HSBC’s analysis points to the potential for reduced EV manufacturing costs by the financial year 2027-2028, contrasting with rising costs for traditional internal combustion engine (ICE) scooters. Additionally, the brokerage expects Ola’s battery venture to achieve competitive pricing, potentially lowering costs by $15 - $20 per KWH compared to imported batteries. This reduction could positively impact the company’s profitability and stock valuation.
Overall, while Ola Electric's recent stock performance reflects growing investor confidence, the company’s financial challenges and the broader EV market dynamics continue to be key factors for investors to consider.
