Ola Electric Shares Surge 6.6% Post Q2 Results

by · Inc42

SUMMARY

  • Shares of Ola Electric zoomed 6.6% to INR 77.59 apiece on the BSE during the intraday trading today (November 11)
  • The rally in the stock came after the company trimmed its losses in the September quarter of FY25 to INR 495 Cr
  • BofA Securities maintained its ‘BUY’ rating on the stock but revised down the target price to INR 120 from INR 145 earlier
  • Added to Saved Stories in Login

Shares of EV manufacturer Ola Electric zoomed 6.6% to INR 77.59 apiece during the intraday trading today (November 11) on the BSE, after the company narrowed its net loss in the second quarter of the financial year 2024-25 on a year-on-year basis.

On November 8 (Friday), the Bhavish Aggarwal-led company reported a 5.5% decline in its consolidated net loss to INR 495 Cr in Q2 FY25 from INR 524 Cr in the year-ago quarter. However, loss widened almost 43% from INR 347 Cr posted in the preceding June quarter amid a decline in EV sales.

The stock saw significant fluctuations today, initially dropping over 3% to reach an intraday as well as an all-time low of INR 70.54. However, it surged from there to INR 77.59. 

The stock ended the day 2.2% higher at INR 74.34 apiece on the BSE. 

Ola Electric’s operating revenue zoomed almost 39% to INR 1,214 Cr during the September quarter of FY25 from INR 873 Cr in Q2 FY24. However, revenue slumped 26.1% from INR 1,644 Cr in Q1 FY25.

Following the results, brokerage BofA Securities maintained its ‘BUY’ rating on the stock but revised down the target price to INR 120 from INR 145 earlier. 

The brokerage said that Ola Electric’s gross margin has been stable at about 20% levels. “Gross margin delivery lends confidence about Ola’s favourable cost structure (BOM cost) coming on back on the Gen 2 upgrade (tech-led) and vertical integration strategy. As we look ahead, there are positive levers from: (1) Gen 3 upgrade starting Jan-25: 20% margin delta on full roll out; (2) battery cell localisation plus insourcing (starting Q1 F26); and (3) full PLI recognition of 13-15% (c5% in Q2) – all scooters are now PLI certified,” it added.

Ola Electric saw its three-month lock-in period expire on November 5, which means that approximately 18.2 Cr (182 Mn) shares that were previously subject to a lock-in period are now eligible for sale.

After its public market debut on August 9, shares of Ola Electric initially nearly doubled to INR 157.53 within a few weeks. However, the stock has been on a downward trend over the last couple of months over rising complaints about after-sales service.

Besides, the company also experienced a decline in sales over the past few months amid rising competition. However, the festive demand rejuvenated the sales in October. 

Earlier this month, the company received a show cause notice from the Central Consumer Protection Authority (CCPA) over alleged violation of consumer rights, misleading advertisement and unfair trade practices. 

Despite the service complaints stacking up, Ola Electric is looking to consolidate its product offerings by focusing on new models and new product launches. The company is targeting 2,000 stores from around 800 today, and more than 10,000 partners by March 2025.

The company said it is focusing on technology and vertical integration to take steady state margins to above 30% from the current gross margins of 20.6% for Q2 FY2025. 

In an investor presentation, Ola Electric addressed the issue of service complaints, saying, “Over the last couple of months, we faced a capacity issue at our service centres because our service capacity growth lagged our sales volume growth over the 2-3 quarters.”

However, the company also claimed that around 80% of its service requests are now being serviced in T+1 days and it has resolved almost all of this backlog. “We’re also expanding our service capacity to handle the higher number of vehicles in operation.”

The company also said that it is on track to deliver the first of the Roadster series motorcycles from Q4 FY25.