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Ola Electric Mobility has attracted significant attention in the stock market, especially with its focus on the electric vehicle (EV) industry. As of November 11, 2024, Ola Electric's stock is trading at ₹76.2. With a market capitalization of ₹33,619 crore, the company is a notable player in India's burgeoning EV sector. Here’s a detailed analysis of Ola Electric share price, technical trends, financial performance, and how it compares with peers in the EV and motorcycle segment.
Ola Electric share price of ₹76.2 is well below its 52-week high of ₹158, reflecting a significant decline in recent months. The stock has tested a low of ₹70.6, indicating strong support around this level. Trading at approximately 4.83 times its book value of ₹14.9, the stock is priced at a premium, which may be attributed to the growth potential of the EV market. However, the company’s ROCE of -32.1% shows that it is still struggling with profitability, a common trend among early-stage companies in capital-intensive sectors.
Ola Electric has yet to distribute dividends, as indicated by its 0.00% dividend yield. This reflects a reinvestment strategy where profits are directed back into the business for expansion, rather than distributing earnings to shareholders.
The technical charts for Ola Electric reveal a period of consolidation followed by recent upward momentum. Here’s a breakdown of key technical indicators:
Moving Averages: The stock price is currently moving below key simple moving averages (SMA) across various periods. The 9-period SMA is at ₹76.58, while the 50-period SMA is at ₹76.74. Both these averages are close to the current price, indicating potential resistance in the immediate term. The 200-day SMA at ₹78.66 acts as a major resistance, and breaking above this level could signal the start of a bullish trend.
Bollinger Bands: Ola Electric's price action has been oscillating near the lower Bollinger Band, indicating increased selling pressure. However, the stock recently bounced up toward the middle band at ₹74.06, showing a potential shift in momentum. A move beyond the upper Bollinger Band could indicate a stronger breakout if buying pressure sustains.
Relative Strength Index (RSI): The RSI value is currently at 58.17, which is below the overbought threshold. This level suggests that the stock is in a neutral to slightly bullish zone. If the RSI continues to increase, it may signal growing momentum and possibly attract more buyers.
Volume: Trading volume has spiked in recent sessions, with 37.257 million shares traded, indicating high investor interest. Volume often precedes price movement, so sustained high volume may support a trend reversal from the current downtrend.
Ola Electric’s quarterly results highlight the challenges it faces in reaching profitability:
Revenue: For the quarter ending September 2024, Ola Electric reported sales of ₹1,214 crore, which shows a decline from the previous quarter’s ₹1,644 crore. Despite fluctuations in revenue, Ola Electric has shown strong compounded sales growth over the past three years, driven by its expansion in the EV market.
Expenses and Operating Profit: Expenses for the quarter stood at ₹1,593 crore, resulting in a negative operating profit of ₹379 crore and an OPM (Operating Profit Margin) of -31%. The negative operating profit reflects high production and operational costs, a common issue in the initial stages of growth in the EV sector.
Net Profit: Ola Electric reported a net loss of ₹495 crore for the quarter, highlighting ongoing challenges in achieving profitability. The company’s negative ROCE of -32.1% further indicates that it is currently not generating returns from its invested capital, which may concern potential investors.
Ola Electric’s focus on scaling its production and expanding its EV infrastructure may eventually improve its financial metrics. However, the company will need to manage costs effectively and increase its sales volume to transition toward profitability.
Ola Electric competes with established players in the two-wheeler and EV segment, including Eicher Motors, TVS Motor, Hero MotoCorp, Wardwizard Innovations, and Urja Global. Here’s how it stacks up:
Eicher Motors: Priced at ₹4,818.50 with a P/E ratio of 31.55 and a market cap of ₹1,32,056 crore, Eicher Motors focuses on premium motorcycles through its Royal Enfield brand. Eicher has a high ROCE of 31.14%, reflecting profitability and efficiency, which gives it a strong position in the market compared to Ola Electric.
TVS Motor Co.: Trading at ₹2,478.60 with a P/E of 62.40, TVS Motor has a market cap of ₹1,17,758 crore and a dividend yield of 0.33%. TVS reported a profit growth of 45.08% in the last quarter, driven by a strong lineup of two-wheelers and initial EV offerings, positioning it as a formidable competitor.
Hero MotoCorp: Priced at ₹4,756.70 with a P/E ratio of 23.34 and a market cap of ₹95,124 crore, Hero MotoCorp is India’s largest two-wheeler manufacturer. Its ROCE of 29.09% reflects strong profitability, which contrasts with Ola Electric’s negative ROCE, showing Hero’s efficiency in managing its capital.
Wardwizard Innovations: Trading at ₹43.80 with a high P/E of 177.33, Wardwizard focuses on electric scooters. With a market cap of ₹1,141 crore, it’s smaller than Ola Electric but operates in a similar space. Wardwizard’s ROCE of 17.84% is positive but relatively low compared to traditional players like Eicher Motors.
In terms of market cap, Ola Electric is smaller than its traditional competitors but larger than other new EV-focused companies like Wardwizard and Urja Global. However, its negative ROCE and lack of profitability reflect the challenges it faces as it tries to gain a foothold in the competitive EV market.
Ola Electric has positioned itself as a key player in India’s EV revolution. The company has been aggressive in expanding its EV offerings, focusing on scooters and motorcycles tailored to urban consumers. Its commitment to developing a robust EV ecosystem, including battery manufacturing and charging infrastructure, aligns well with India’s national goals for electric mobility.
However, achieving profitability remains a challenge. Ola Electric needs to scale production efficiently to meet growing demand while controlling costs. As it expands its EV portfolio and refines its manufacturing processes, the company has the potential to capture a significant market share in India’s two-wheeler EV segment.
Investors interested in Ola Electric should weigh the following factors:
High Valuation Relative to Book Value: The stock trades at 4.83 times its book value, which is high compared to traditional metrics but not uncommon for growth-focused companies.
Profitability Concerns: Negative ROCE and consistent losses indicate that Ola Electric is still in a high-growth, high-investment phase. Investors should have a long-term outlook and be prepared for volatility.
EV Market Potential: As India pushes for electric mobility, Ola Electric stands to benefit from government incentives, consumer demand for EVs, and an expanding product lineup.
Ola Electric faces several risks that could impact its performance:
High Operating Costs: The company’s high expenses are a concern, as they contribute to negative profit margins. Ola will need to achieve economies of scale to bring down costs and improve profitability.
Intense Competition: The two-wheeler market is crowded, with established players like Hero, TVS, and Bajaj also investing in EVs. This competition could affect Ola’s market share and profitability.
Capital Requirements: Scaling production and building EV infrastructure requires substantial capital investment. The low interest coverage ratio highlights that Ola may struggle to meet interest obligations if it relies heavily on debt.
Ola Electric is an ambitious player in India’s EV market, with a focus on transforming the two-wheeler segment. While the company has shown strong sales growth, its negative operating margins and profitability metrics underscore the challenges it faces. The technical indicators suggest a potential rebound, but long-term investors should be cautious and consider the high valuation and operating losses.
Ola Electric’s growth prospects are tied closely to India’s shift toward electric vehicles. For investors with a high-risk tolerance and a long-term outlook, Ola Electric may offer an opportunity to participate in the EV market’s growth. However, the road to profitability remains uncertain, and the company must execute effectively on its strategic initiatives to establish itself as a leading player in India’s competitive automobile market.
