Goldman Sachs has downgraded Ola Electric Mobility Ltd. to sell from neutral and cut its 12-month target price to Rs 23 from Rs 39.28 noting concerns over cash flow, funding requirements and market share. The current market price is Rs 32 and the revised target implies a downside of 28.1% from the current market price. The brokerage said it sees better return potential elsewhere in its two-wheeler coverage, which offers an average upside of 20%.
Goldman Sachs said Ola Electric's path to sustainable free cash flow generation has become less clear, given relatively high interest costs and capital expenditure requirements across its battery cell and electric two-wheeler businesses.
These requirements come during what the brokerage expects to be a more extended period of operating losses at current market share levels, adding to its caution on the stock.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
To cover current capital expenditure and interest servicing requirements, Ola Electric would need revenue in FY28 to FY30 to reach between 3.6 times and 7.1 times its FY26 level, according to Goldman Sachs. That compares with a 55% decline in revenue in FY26 against FY24, the brokerage said, highlighting the scale of growth required to meet those needs.
Goldman Sachs also flagged possible operating challenges in the battery cell business following the recent departure of its head. The brokerage reduced its FY27 to FY29 revenue estimates by up to 10% to reflect a more challenging market share environment for Ola Electric compared with its two-wheeler peers.
Goldman Sachs said it could turn more constructive if a shift towards dealer-led sales and servicing revives the electric two-wheeler business and improves weak brand sentiment.
It would also look for a positive consolidated operating Ebitda margin, alongside faster customer additions and profitability in the cell business. These are the conditions the brokerage identified for a more favourable view of the company.
ALSO READ | Ola, Uber To Swiggy, Zomato: Your Everyday Apps Will Face A 5% GST Rate. CBIC Clarifies What It Means
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
