Ather Energy Initiated With 'Buy' By HSBC, Nomura — Is This EV Stock A Must-Buy? Check Target Prices

Ather Energy Ltd., has received a 'buy' rating from HSBC and Nomura, as the brokerages initiated coverage on the stock. HSBC has initiated coverage with a target price of Rs 450, and Nomura initiated with a target price of Rs 458.

HSBC highlighted Ather Energy as a good company in a tough industry. "Ather’s product quality, technology leadership and distribution expansion should drive its market share in a tough market," it added.

The brokerage noted that EV penetration remains low, but we think the stock price will be driven by its relative performance, not industry growth. "Acceleration in EV penetration a significant upside risk for earnings and valuation," it added.

HSBC forecasts a FY25-28 revenue CAGR of 47% and expect Ebitda breakeven by Q4FY27. "In FY28, we forecast a gross margin of 28% and an Ebitda margin of 4%, when the monthly volume run rate should hit 45,000, up from the current 14,000," it added.

The brokerage uses DCF to value Ather and its target price implies a FY27 price/ sales of 3.4 times.

As per HSBC, the downside risks include aggressive Honda EV ramp-up, weak EV penetration and EL product failure.

Nomura shared that the company is riding on electrification and premiumisation. It further noted strong long-term growth potential at attractive valuations.

The brokerage estimates Ather's gross margin will rise from 16.6% in Q4FY25 to 28% by FY28F, which is in line with that of ICE 2W companies. As the PLI scheme ends in FY28, we believe peers will need to raise prices by approximately 13-15% to maintain margins, which will benefit Ather.

We expect the company to turn Ebitda breakeven by mid-FY28F and margins to ramp up after this.

Ather is Nomura's top pick in the 2W segment. "The company well positioned to capture the opportunity in the EV segment. New product launches and distribution expansion key growth catalysts. Ebitda margin to ramp up as PLI ends.," it added.

The brokerage has initiates on Ather with a target price based on 3.3 times EV/sales on average FY27-28F sales. This is also backed by our DCF valuation.

"While on EV/sales, Ather trades in-line with high-growth peers such as TVS at2.8 times FY27F, its medium term growth will be the highest in our coverage universe," it added.

Key risks include strong competitive intensity from new EV entrants including Honda Motorcyle and a rise in GST on EVs.