Shares of Ola Electric Mobility (NS:OLAE) have garnered significant attention during Tuesday’s trading session following buy ratings from two major global brokerages, Goldman Sachs (NYSE:GS) and BofA Securities.
The share price increased by more than 7% on the positive brokerage notes. This follows a largely flat period since its muted listing over a month ago.
After hitting a peak of Rs 157.53 on August 20, the stock has been trading in a range and closed at Rs 107.65 in the previous session, losing over 3% in a listless market.
Bullish outlook from Goldman Sachs and BofA Securities
Goldman Sachs has set a target price of Rs 160 on Ola Electric, implying a 49.53% upside from Monday’s closing price.
The global brokerage expects the company to achieve significant milestones, including an EBITDA breakeven by FY27 and a free cash flow (FCF) breakeven by FY30.
Goldman Sachs projects a robust revenue growth of over 40% compounded annually from FY24 to FY30, with an 11.9% EBITDA margin and a 27% return on invested capital (ROIC) by FY30.
“We view Ola Electric as positively levered to long-term structural trends in India’s electric two-wheeler market despite debates around its in-house battery cell manufacturing,” Goldman Sachs stated.
Meanwhile, BofA Securities has set a target price of Rs 145, signaling a potential 36% upside.
The brokerage emphasized the company’s technology and cost leadership, which it believes positions Ola Electric well to navigate the competitive landscape.
BofA also highlighted the company’s dominance in the electric two-wheeler (E2W) market, with a 40% share year-to-date in 2024.
“The adoption rate of electric two-wheelers in India, currently at 6.5%, is expected to rise to 25% by FY30, and Ola’s leadership in technology and cost will drive its success,” BofA Securities remarked.
Source: Finshots
Concerns from Ambit Capital and HSBC
While the outlook from Goldman Sachs and BofA Securities is bullish, Ambit Capital has a more cautious perspective.
Ambit recently initiated coverage on Ola Electric with a ‘Sell’ rating and a target price of Rs 99.60, citing concerns about increasing competition and potential policy risks.
“New players like Honda and Suzuki entering the market, combined with existing OEMs expanding their portfolios, could erode Ola Electric’s market share from 42.4% in FY25 to 25% by FY31,” Ambit Capital warned.
The firm also raised concerns about the capex-intensive nature of Ola Electric’s business model and the risk of changes in government incentives.
Adding to the cautious sentiment, HSBC also retained its ‘Buy’ rating but flagged concerns about Ola Electric’s recent market share losses.
The brokerage suspects that the losses could be attributed to the ramp-up of lower-cost variants from competitors and noted that there is a 15-20% downside risk to volume estimates for FY25 and FY26 if these trends continue.
Market share and the road ahead
Despite the mixed outlook from various brokerages, Ola Electric’s position as a market leader in the Indian electric two-wheeler space remains solid.
As the company works towards its breakeven targets and navigates a rapidly evolving competitive landscape, the coming years will be crucial in determining whether Ola Electric can maintain its market leadership and fulfill its growth potential.
This article first appeared on Invezz.com
