Ola Electric Gets 'Hold' From Investec On Initiation, Brokerage Sees Bumpy Road Ahead

Ola Electric Mobility Ltd. has got a 'hold' rating from Investec upon its initiation as the brokerage envisions an uphill road ahead for the company. Investec gave Ola Electric a target price of Rs 76 apiece, which implied 1.6% upside.

The company is currently trading at 2.9 times of financial year 2027 estimates, price-to-sales implying 11% premium to peers. Investec relied on a combination of discounted cash flow and relative valuation to arrive at the target price.

Ola Electric faces increasing pressure from established original equipment manufacturers, and new entrants. To add to its woes, Japanese manufacturers are also set to join the fray. Ola Electric's cash flow will likely remain in check because of aggressive discounting , service-related issues, and investments in cell manufacturing. However, reduction in material bills may become a cause for re-rating, Investec said in a note.

Ola Electric's first-mover advantage is fading now. It played a key role in driving growth of electric two-wheelers in India with volumes skyrocketing from 21,000 units in financial year 2022 to an estimated 4,32,000 units by financial year 2025. It had a remarkable CAGR of 174%, according to Investec.

Ola Electric Mobility's plan to set up the 4,680 cell technology plant without a technology partner presents several challenges, Investec said. Achieving efficient manufacturing with optimal yields, compared to global competitors that have already scaled up, may prove difficult. Moreover, losses from cell production, and high capital expenditure might adversely affect overall profitability and free cash-flow generation.

Ola Electric Mobility share price declined 1.2% during the day to Rs 73.91 apiece. It was trading 0.72% down at Rs 74.27 apiece as of 11:40 a.m., as compared to 0.67% decline in the NSE Nifty 50.

The stock declined 18.56% in the last 12 months. The relative strength index was at 36.15.

Out of the eight analysts tracking the company, five maintain a 'buy' rating, one recommends a 'hold,' and two suggest 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 16.3%