6,800% return in 10 years! Geojit Financial Services sees more steam left in this electric bus maker

A smallcap company, which is primarily engaged in manufacturing electric buses and composite polymer insulators, has been buzzing on Dalal Street. Firstly, it has just received an ‘Accumulate’ rating from a leading stock broker and secondly, it has managed to multiply investors’ wealth 69 times in the past 10 years. This is Olectra Greentech.

Shares of the company have soared 6,836 per cent to Rs 659.65 on April 25, 2023, from Rs 9.51 on April 25, 2013. Brokerage Geojit Financial Services on Tuesday initiated the coverage on the electric bus major with an ‘Accumulate’ rating and set a target price of Rs 738, indicating an upside of more than 10 per cent from the market price.

Olectra Greentech is a subsidiary of Megha Engineering and Infrastructures. There are expectations that EV adoption in buses will likely speed up in the current year, and the Centre plans to procure 50,000 buses with an investment outlay of Rs 1,000 crore. The company last year also bags the biggest-ever order of 2,100 electric buses worth Rs 3,675 crore from BEST (Brihanmumbai Electric Supply and Transport), Mumbai.

Meanwhile, gross sales of the company increased by 25 per cent annually (CAGR) to Rs 593.26 crore for the year ended March 2022. Olectra Greentech reported gross sales of Rs 59.79 crore in FY2012. Likewise, the net profit of the company jumped more than 33 per cent annually to Rs 35.35 crore during the same period.

The government has plans to have 70 per cent of commercial vehicles and 40 per cent of the buses go electric by 2030. According to the Ministry of Road Transport, at present, 56 state road transport undertakings (STUs) in the country hold a total of 149,095 buses, of which 1,33,770 were operated.

Olectra Greentech currently holds 30 per cent of the market share in this segment. Currently, E-Bus constitutes 92 per cent of the company’s revenue.

Saji John, Research Analyst, Geojit Financial Services in a report said, “We expect the government intention for carbon-free emission and technological capability coupled with a strong association with STUs, will drive future growth for the company. Given the strong order book and capacity expansion, we roll over and value the stock at 35 times FY25 EPS (Average 3yr =46 times) factoring in a 72 per cent earning CAGR over FY23-25 and recommend accumulate rating at the current market price with a target price of Rs 738.”

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