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On Monday, Citi research analysts, led by Arvind (NSE:ARVN) Sharma, adjusted the price target for Ola Electric (OLAELEC:IN), reducing it to INR85.00 from the previous INR90.00. Despite this change, the firm continues to recommend a Buy rating for the stock. The revision follows Ola Electric’s third-quarter financial results for FY25, which showed an EBITDA loss greater than anticipated, although there was a slight improvement in the company’s gross margin.
The analysts indicated that unexpected costs had a significant impact on Ola Electric’s earnings. These included warranty-related expenses and one-time employee costs, which they believe affected EBITDA by approximately 12 percentage points. Other factors that negatively influenced profitability were increased sales and marketing expenditures during the festive season, the costs associated with expanding the network, and negative operating leverage.
Management at Ola Electric expressed optimism for a rapid recovery in sales volumes, which they attribute to an expanded footprint, the introduction of new motorcycle and scooter models, and the upcoming launch of their Generation 3 products. They also anticipate improvements in profit margins. However, Citi analysts have chosen to adopt a cautious stance, preferring to see tangible progress in product deliveries before fully endorsing the company’s outlook.
Citi’s analysts concur that Ola Electric holds a strong position in the market with its diverse product portfolio and technological capabilities, including vertical integration, which could potentially capitalize on the long-term electrification trend in the Indian two-wheeler (2W) sector. Nevertheless, the firm has revised its forecasts for Ola Electric, lowering volume estimates and projecting wider losses for the period FY25-27. The new price target is based on four times the expected FY26 enterprise value-to-sales ratio, down from the previous valuation.
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