'Ola is a buy opportunity,': HSBC stock initiation report sends Ola Electric shares soaring 16%

Shares of Ola Electric Mobility surged nearly 16 per cent during the trading session on Friday after the recently listed EV player reported a mixed set of numbers in the June 2024 quarter followed by a strong management commentary and some positive commentary from the brokerage firms.

Ola's Q1 results
Ola Electric Mobility reported a consolidated net loss of Rs 347 crore for the quarter ended June 30, 2024, which widened about 30 per cent on a year-on-year (YoY) basis from Rs 267 crore in the year ago period. The EV two-wheeler maker's revenue from operations rose 32.3 per cent YoY to for the quarter stood at Rs 1,644 crore. Ebitda loss stood at Rs 205 crore for the quarter.

Stock performance of Ola
Shares of Ola Electric Mobility Ltd surged 15.77 per cent to Rs 128.09 during the trading session on Monday, as its total market capitalization jumped to close to Rs 56,500 crore. The scrip had settled at Rs 110.64 in the previous trading session Thursday. The stock is up 68.5 per cent over its IPO price.

Shares of Ola Electric Mobility were listed a week earlier, when the company raised a total of Rs 6,145.56 crore via its IPO, offering its shares for Rs 76 apiece. The stock was listed flat at the bourses, debuting at the issue price itself. However, it soared to Rs 130, rising 71 per cent over the issue price post listing.

HSBC initiates coverage on Ola Eletric
Global brokerage firm HSBC has initiated coverage on Ola Electric post its Q1 results and concall. The newly listed automobile maker has received its first 'buy' call post debut as HSBC believes that EV manufacturing costs may fall significantly by FY27/28, while internal combustion engine (ICE) scooters may go up due to emission standards.

However, it said that the barrier to e2-wheelers switching may fall but Ola's battery venture may be a success. It sees Ola Electric as an opportunity to buy given the sustained regulatory support citing reduction in cost and positive risk-reward for the battery venture. However, slow penetration of e2-wheelers and battery plant issues are the key challenges. HSBC has a target price of Rs 140.

What other analysts say
In its recent report, Nomura said that Motorcycles have been a tougher segment for electrification and the last few launches including Tork, Revolt, Ultraviolette and more have not been successful. However, it estimates 25 per cent on EVs in two-wheelers by FY30. "With multiple price points and range options from Ola, it would be interesting to watch how customers respond to them."

Ola is likely to act as a catalyst for boosting investors’ confidence and could help accelerate the growth and adoption of electric two-wheelers across the country. It is the only automaker in India approved for both PLI schemes for advanced automotive technology and cell chemistry batteries, said  Saji John, Senior Research Analyst at Geojit Financial Services.

"Despite profitability challenges and a loss in FY24, the company is poised to enhance profitability in the long term through improved scalability and by vertical integration. We expect the debut will encourage other players to unlock their value and validate their presence in EV expansion," he said.

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