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Synopsis: HSBC's initiation of coverage on Ola Electric with a 'buy' rating fueled a 16% surge in the company's share price, reflecting growing investor confidence. Despite a wider Q1 loss, Ola's strategic launches and technological advancements are seen as promising factors for long-term profitability.
Ola Electric Mobility Ltd. witnessed a significant surge in its share price, rising nearly 16% to Rs 128.09 during Friday's trading session, boosting its market capitalization to approximately Rs 56,500 crore. This jump followed the company’s first "buy" recommendation from HSBC, which set a target price of Rs 140, citing a promising outlook for the EV maker despite the broader challenges in the industry.
Q1 Financial Performance
Despite the positive stock performance, Ola Electric reported a consolidated net loss of Rs 347 crore for Q1 FY24, a 30% increase from the same period last year. However, the company's revenue from operations grew by 32.3% year-on-year, reaching Rs 1,644 crore. HSBC's optimism stems from Ola's strategic moves, including the launch of new electric motorcycles and advancements in battery technology.
HSBC’s Outlook and Market Sentiment
HSBC’s coverage on Ola Electric highlighted potential cost reductions in EV manufacturing by FY27/28, supported by regulatory tailwinds and an improving risk-reward profile, particularly in battery ventures. However, the brokerage firm also pointed out risks such as slow penetration of electric two-wheelers and potential challenges in battery production. The company’s stock has risen 68.5% since its IPO, indicating strong investor confidence, despite ongoing challenges.
Analyst Insights
Other analysts, including those from Nomura and Geojit Financial Services, have noted the broader challenges in electrifying the two-wheeler market, with mixed results from recent launches. Nonetheless, Ola Electric is seen as a key player that could drive the adoption of electric vehicles in India, especially with its approval under two PLI schemes for advanced automotive technology and cell chemistry batteries.
