Ola Electric, a prominent player in the electric two-wheeler (E2W) market, faces significant headwinds as major brokerages Citi, HSBC, and Emkay Global have revised their price targets downward, suggesting a potential decline of up to 32% for its shares. The negative outlook follows the company's weak March quarter financial performance.
Brokerages Issue "Sell" and "Reduce" Ratings
Following a review of Ola Electric's recent results, investment banks have expressed caution. Citi has maintained its "Sell" rating, adjusting its target price to Rs 26 from an earlier Rs 22. HSBC has advised a "Reduce" stance, lowering its target from Rs 45 to Rs 33. Emkay Global also reiterated its "Sell" recommendation, setting a revised target of Rs 25, up slightly from Rs 20 previously. Ola Electric shares closed at Rs 36.50 apiece on Wednesday, indicating substantial downside potential based on these targets.
Weak Q4 Performance and Expanding Losses
Emkay Global highlighted Ola Electric's challenging fourth quarter, noting a 57% year-over-year drop in revenue, driven by a 61% decline in sales volumes. While the gross margin saw an improvement of 424 basis points quarter-over-quarter, reaching 38.5% due to PLI (Production Linked Incentive) accruals for its Gen3 products, the company's EBITDA margin losses expanded significantly. These losses grew to 106% from 58% in the preceding quarter, signaling increased operational challenges.
Market Dynamics and Future Competition
Despite the company-specific concerns, Emkay Global acknowledges the robust underlying growth in the broader electric two-wheeler industry, noting healthy expansion and increased penetration following recent GST cuts. Ola Electric has observed some sequential volume improvement and market share gains, which Emkay attributes to better production capacity, increased sales in price-sensitive northern markets, and competitors like Ather operating at peak utilization amid strong E2W demand.
However, the brokerage warns that Ola's efforts to improve execution, reduce costs, and enhance brand perception could be a difficult and prolonged process. This is particularly true given the heightened focus from established incumbents and the scaling up of competitors like Ather. The anticipated introduction of new production capacities by rivals in the latter half of FY26 is expected to intensify competition further, making Ola's recovery in volume and market share a critical factor to monitor. Emkay Global stated a preference for playing the E2W theme through Ather and TVS Motor rather than Ola Electric.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.