“No one expected Ola Electric to perform this well in such a short span of time. After listing at par, the stock has moved up sharply in the last few sessions. It looks like madness which is beyond fundamentals. As a strategy, however, traders or investors must chase the momentum with strict stop-losses,” Ambareesh Baliga, an independent market analyst.
On Monday, August 19, Ola Electric share price hit 10 per cent upper circuit to notch an all-time high of Rs 146.03 per share on the BSE. The share’s circuit limit was revised downwards from 20 per cent to 10 per cent last Friday (August 16) after a spectacular rally in mere five sessions.
So, what’s fueling the rally in Ola share price?
A large part of buying in Ola Electric stock in the last few sessions, according to Deven Choksey, managing director at DRChoksey FinServ, is attributable to massive liquidity flows in the markets and institutions adding exposure to new stocks on the block.
“The stock’s current valuations seem to be factoring-in most of the developments and they appear slightly stretched in our view. Investors, who bought the shares at IPO price, may book partial profit and enter at a lower price later,” he said.
According to Ola Electric’s Red Herring Prospectus (RHP), the stock has a free-float of around 17 per cent whereas 82.74-per cent outstanding is locked-in.
“The stock can still find support and manage to bounce back in case the markets correct, say up to 5 per cent. A steeper fall in the markets, however, can see Ola’s share underperform, which will eventually have to be supported by company’s / stock’s fundamentals, which are missing,” Baliga cautions.
Financially, Ola Electric Mobility reported a net loss of Rs 347 crore in the April-July quarter of the current financial year (Q1-FY25) as compared to Rs 267-crore net loss reported in Q1-FY24.
Revenue from operations, however, increased 32.3 per cent year-on-year (Y-o-Y) to Rs 1,644 crore with automotive segment Ebitda margin at -1.97 per cent, up 632 bps Y-o-Y.
Notably, pre-IPO notes by brokerages said the company demanded an EV/Sales multiple of 6.3x at the issue price of Rs 76, which was a significant premium to the peer average of 3.1x.
Ola’s growth outlook
Global brokerage HSBC points out that Ola Electric’s future growth will unlikely be linear as the rate of electric vehicle (EV) penetration may be a lot more gradual than what the company expects.
That apart, Ola Electric, HSBC said, may not gain market share as incumbents are now equally aggressive; regulatory support via subsidies may decline eventually; and foray into battery manufacturing may be risky as a failure to compete with global players on quality and yield may impact its competitive positioning and balance sheet strength.
The stock has already surpassed the brokerage’s target price of Rs 140.
Ola Electric also witnessed the highest-ever deliveries of vehicles at 1,25,198 units in Q1 FY25 as against 70,575 units delivered in the same period last year.
“Despite a unanimous belief that the e2W segment is set to grow multifold, coupled with Ola’s promise to gain in-house control on the battery component, most positives seem to be aggressively priced-in. Nonetheless, there could be some steam left in the stock in terms of momentum, as more institutions stock up on the shares to bulk their exposure to the sunrise industry,” said Nirav Karkera, head of research, Fisdom.
First Published: Aug 19 2024 | 1:04 PM IST
