HSBC Global Research maintained its “Buy” rating on Ola Electric, albeit with a lowered target price of Rs 110. Analysts observed service quality improvements at the electric two-wheeler maker’s service centres after a follow-up visit a month later. However, they noted that full normalisation at the service centres may take time.
The revised target price represents a 42 percent upside from Ola Electric stock’s Friday closing price of Rs 77.32. HSBC’s previous target price for the stock was Rs 140.
The revised target price represents a 42 percent upside from Ola Electric stock’s closing price of Rs 77.32 on Friday. HSBC had previously set a target of Rs 140.
In their follow-up visit to Ola Electric service centres, HSBC analysts observed service centres appeared less chaotic, with vehicle outflow slightly exceeding inflow. The backlog of vehicles awaiting service has decreased by 20-30 percent month-on-month, the analysts said in a note to clients. Ola Electric has also boosted its technician workforce at service stations and is working with external consultants from E&Y to improve the situation further. HSBC said that Ola Electric is also scouting for locations to establish new large service stations.
Despite these positive developments, HSBC analysts said Ola Electric faces considerable challenges. The report noted that Ola Electric’s long-term success hinges on enhancing product quality and sustaining its market share in the increasingly competitive electric two-wheeler segment.
The HSBC note added that despite the drop in Ola Electric’s stock price, the stock remains a high-risk-reward proposition, where the upside is contingent on the success of its electric two-wheelers and in-house batteries.
The report further pointed out that Ola’s bikes are at least 2-3 years ahead of the competition, and a successful battery venture will provide Ola with a lasting competitive advantage.
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