Synopsis: HSBC initiated coverage on Ola Electric with a 'Buy' rating, despite acknowledging risks such as slow EV adoption and competition. They maintained a target price of Rs. 140 per share but flagged a potential 15-20% downside risk in volumes if market share losses continue.
HSBC initiated coverage on Ola Electric in mid-August, providing a 'Buy' rating with a target price of Rs. 140 per share, despite their conservative outlook on electric vehicle (EV) penetration in India.
According to HSBC, Ola Electric remains a worthwhile investment, but recent market share losses raise concerns.
The brokerage believes these losses could be attributed to increased competition, particularly from the ramp-up of low-cost electric two-wheeler (e-2W) variants by rivals.
This could negatively impact Ola Electric's volumes by as much as 15-20% in FY25 and FY26 if the trend persists.
Despite maintaining their target price, HSBC flagged multiple downside risks, including slower adoption of e2Ws, battery plant challenges, and intense competition from established players.
These factors, combined with regulatory uncertainties and potential issues with scaling battery production, could hinder growth prospects for the company in the medium term.
Additionally, Ambit Capital has taken a more cautious stance, assigning a 'Sell' rating on the stock.
They foresee Ola's market share declining to 25% by FY31 from its current 42.4%.
Ambit Capital cited challenges such as overestimated volume growth and market saturation, warning of a tight margin of safety against these risks.
Their target price of Rs. 99.6 for the stock further underscores their cautious outlook.
In conclusion, while HSBC remains cautiously optimistic about Ola Electric's long-term growth potential, recent developments—such as market share erosion and stiff competition—pose significant challenges.
The brokerage advises caution, as the company's ability to sustain its current market position and overcome operational hurdles will be critical for its future performance.
Ambit Capital’s less favorable outlook reflects the uncertainty surrounding Ola Electric’s market dominance and growth trajectory.
Disclaimer: This article is for informational purposes only and should not be construed as financial or investment advice. Please consult a certified financial advisor before making any investment decisions.
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