Ola Electric shares: 50% upside? Goldman Sachs, BofA initiate coverage with 'Buy' ratings

Foreign brokerages Goldman Sachs and BofA Securities have reportedly initiated coverage on Ola Electric Mobility Ltd with 'Buy' ratings and price targets that suggested up to 50 per cent potential upside on the counter. The 'Buy' ratings came a week after Ambit Capital initiated coverage on the stock with a 'Sell' call, saying opportunities are huge but rising competition may drive Ola's market share lower.

Ola Electric can achieve Ebitda breakeven in FY27, Goldman Sachs said. The brokerage expects a revenue growth in excess of 40 per cent compounded annually over FY24-30, implying a free cash flow breakeven in FY30. Goldman Sachs is expecting Ola Electric to achieve 11.9 per cent Ebitda margin and 27 per cent ROIC by FY30. The company is positively levered to long-term structural trends in India's electric two-wheeler market, Goldman Sachs said as it suggested a target price of Rs 160 on the counter.

"We initiate coverage on Ola Electric with a Buy rating and a 12-month TP of Rs 160 implying 50% upside. Ola is India’s market leader in Electric 2Ws (32 per cent market share as of Aug-24). We view OLA as positively levered to long-term structural trends in India’s E2W mkt (Limited range anxiety of E2Ws; Lower running costs vs ICE 2Ws; Declining battery costs; new TAMs including Electric 3Ws)," Goldman Sachs said.

The foreign brokerage said it see debates around in-house battery cell manufacturing, D2C sales and after-sales model, upcoming launches by incumbents and FCF breakeven journey, as key drivers of volatility for the stock in the coming year.

The stock closed at Rs 107 on Monday. The Goldman Sachs' target price suggests 49.53 per cent upside potential over this price.

Goldman Sachs said Ola Electric's motorcycle portfolio roll out starting March quarter 2025 and entry into another new fast growing market will be the key catalysts for the stock.

BofA Securities, on the other hand, has reportedly suggested a price target of Rs 145 on the stock, saying technology and cost leadership enabled Ola's right to win. In the case of battery making, it said there are a lot of naysayers but it is worth a bet. This target suggests a potential 36 per cent upside for Ola Electric stock over Monday's closing price.

Foreign brokerage HSBC, which last month initiated coverage on Ola Electric Mobility Ltd with a 'Buy' rating, said that the recent market share loss at Ola Electric is worrisome, as it suspects that the development could be due to the ramp-up of low cost variants from competition. While the brokerage retained its 'Buy' rating and a target price of Rs 140 on the stock, there could be 15-20 per cent downside risk to volume estimates for FY25 and FY26 if such a market trend sustains, it said.

Ambit Capital said it expects Ola Electric's market share to decline to 25 per cent by FY31 from 42.4 per cent in FY25 as new players such as Honda and Suzuki enter, other e-2W OEMs expand their product portfolio and reach and its incentives gets fully utilised.

"This coupled with the risk of changes in government policies, heightened competitive intensity and thin profitability in a capex-intensive business model pose risks for OLA Electric. Initiate with SELL and target price of Rs 99.60," Ambit Capital said.