Ola Electric shares breach Citi's target price, top 90 level; stock up 39% in 5 days

Ola Electric Mobility Ltd saw its shares rallying over 6 per cent in Thursday's trade, taking their five-day rally to 39 per cent. In the process, the stock breached the Rs 90 target set by Citi on November 26 while initiating coverage on the stock with a 'Buy' rating.

The stock rose 6.17 per cent to hit a high of Rs 93.60. Citi's positive stance on Ola Electric was based on the fact that it is the largest electric two-wheeler player in India with 38 per cent market share in FY25YTD. Citi said it factored in a wide product portfolio, strong R&D focus, significant vertical integration (including Li-ion cell manufacturing), and large scale of production. Besides, it took into account soon to-be-launched motorcycles and E3Ws potential volume boosters.

"We admit service perception has been negative of late, but expect it to subside over the medium term as back-end supply chain catches up with volume growth. Key risks: 1) overall weak EV penetration, 2) elevated competition, 3) continued negative perception on product/service quality, 4) technology obsolescence, 5) sustained net losses," it said on November 26.

Citi prefers Eicher Motors and Hero MotoCorp over Ola Electric. But it likes Ola Electric over Bajaj Auto and TVS Motor. It values Bajaj Auto at 3.3 times FY26 EV/sales and suggested a target price of Rs 7,800. It sees TVS Motor at 2.1 times FY26 EV/sales and set a target price of Rs 1,700). Hero MotoCorp is valued at 2.4 times FY26 EV/sales and has a target price of Rs 6,300). Citi, meanwhile, values Eicher Motors' Royal Enfield business at 6.3 times FY2 EV6 sales.

Ola has not broken even at the Ebitda level yet. Therefore Citi used sales-based valuation methodology (4 times FY26 EV/sales) to arrive at its target price. The premium (10 per cent) to average of our implied target multiples for covered 2W OEMs is merited, given Ola dominates a fast-growing segment with attractive long-term prospects, the brokerage had said earlier.

"We value Ola at target price of Rs90 based on 4x FY26E EV/sales. Our target multiple is based at 10% premium to the average of the implied target EV/Sales multiples for the 4 listed 2W OEMs under our coverage. We believe the premium is merited given Ola’s dominance in the E2W segment and potent long-term growth opportunities," Citi said.

Large scale of production provides economies of scale to Ola as well as vendors, Citi said.

"As capacity utilisation increases, we expect profitability to improve. Ola has also been investing significantly in technology, reflected in attractive features and strong backward integration (including manufacture of Li-ion cells). Ola believes the new Gen 3 platform will boost profitability significantly. Admittedly, there have been service issues, but in our view if the product offering is attractive, service issues could subside over the medium term as back-end supply chain improves," Citi said.