- Citigroup raised Ola Electric's target price to Rs 26 but kept a Sell rating due to volume concerns
- Ola Electric's Q4 net loss narrowed to Rs 500 crore with revenue down 56.6% to Rs 265 crore
- Gross margin improved to 38.5%, but high fixed costs and weak volumes hurt profitability
Citigroup raised its target price on Ola Electric Mobility to Rs 26 from Rs 22 but maintained its "Sell" rating, saying the company still lacks the volume growth needed to improve profitability despite gains in margins and operating metrics.
The brokerage said Ola Electric's fourth-quarter results fell short of estimates because of lower average selling prices and weaker-than-expected volumes, even as gross margins remained ahead of forecasts.
"While we acknowledge Ola's gross margin improvement, we'd look for sustained volume growth before getting more constructive," Citi said in a note after the company's earnings.
Citi added that nearly 90% of Ola Electric's operating costs remain fixed, which continues to weigh on operating leverage at current sales levels.
Losses Narrow
Ola Electric reported a consolidated net loss of Rs 500 crore for the March quarter, compared with a loss of Rs 870 crore a year earlier. Revenue declined 56.6% to Rs 265 crore from Rs 611 crore.
Loss at the earnings before interest, taxes, depreciation and amortisation, or Ebitda, level narrowed to Rs 281 crore from Rs 695 crore a year earlier.
Citi said quarterly revenue was 21% below its estimates because of lower average selling prices, partly linked to accounting changes related to extended warranty sales, and lower volumes.
Gross margin stood at 38.5% during the quarter, or 33.5% excluding production-linked incentive benefits, above Citi's estimate of 35%.
The brokerage, however, said higher selling and administrative expenses kept Ebitda losses above expectations despite the improvement in margins.
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Demand Outlook
Bhavish Aggarwal said during the earnings call that electric vehicle demand remained strong amid rising fuel prices and improving EV penetration.
Citi noted that EV penetration rose to 8% in April and May from 6.6% in FY26.
Aggarwal guided for 40,000-45,000 orders and revenue of Rs 500 crore to Rs 550 crore for the first quarter of FY27. He also said Ola Electric's auto business generated positive free cash flow during the quarter as the company focused on lowering costs and improving working capital efficiency.
Aggarwal said inventory levels had reduced to four-six days, while average service turnaround time fell to one day in March 2026 from nine days in October 2025 after the company started stocking spare parts instead of procuring them on an order basis.
He added that warranty costs declined to Rs 59 crore in FY26 from Rs 555 crore in FY25 due to improvements in Ola Electric's Gen 3 platform.
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Breakeven Focus
Citi said several structural measures could support margins over time, including in-house battery cell manufacturing, higher vertical integration, migration to the Gen 3 platform and cost reduction initiatives.
Aggarwal said all Ola Electric vehicles would use internally manufactured battery cells by September 2026. He also said the company's gigafactory capacity was scaling up to 6 GWh from 2 GWh currently.
The company expects FY27 auto business capital expenditure to remain below Rs 50 crore and believes it can scale annual two-wheeler production capacity to one million units without significant additional capex, Aggarwal said.
He also said Ola Electric's Roadster portfolio held around 50% market share in electric motorcycles.
Still, Citi said profitability remained dependent on stronger volumes, with monthly breakeven levels estimated at around 20,000-25,000 units.
"Weak volumes nullify the positive impact of higher gross margins," the brokerage said.
Citi added that battery energy storage systems could emerge as a major revenue driver over time, though visibility on customers and order inflows remained limited.
According to data compiled by Bloomberg, all six analysts tracking Ola Electric currently have a "Sell" rating on the stock. The average analyst target price stands at Rs 30.14, implying a potential downside of about 19% from the stock's last closing price.
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