The revised goal implies a modest 4% upside from present ranges, with HSBC saying the valuation “displays all enhancements” after the electrical automobile maker’s 25.8% gross margin in Q1FY26 shocked positively, effectively above its estimate of 19%.
“After a number of misses, punchy gross margin growth in 1Q was a optimistic shock,” HSBC mentioned.
The brokerage attributed the margin beat primarily to an 11% price saving from Ola’s new Gen-3 scooter platform, which drove a 12-percentage-point enchancment quarter-on-quarter. HSBC expects additional gross margin growth of about 4 proportion factors in Q2 because the older Gen-2 fashions, which accounted for 20% of Q1 gross sales, part out and production-linked incentive (PLI) advantages doubtlessly start to accrue.
Execution beneficial properties, however structural issues stay
Ola Electrical achieved EBITDA breakeven in its auto enterprise in June, with administration anticipating optimistic EBITDA within the present quarter. The corporate has ramped up inner efficiencies by bringing motor manufacturing in-house, redesigning battery packs, and integrating its motor management models (MCUs), which additionally decreased wiring harnesses.
Regardless of these advances, HSBC flagged dangers to Ola’s battery cell operations. The corporate has began manufacturing 4680-format cells and plans to increase capability from 1.4GWh to 5GWh by FY27. Nevertheless, the brokerage warned that Ola might miss key manufacturing milestones required to qualify for PLI advantages, doubtlessly attracting penalties of round Rs 1,000 crore.
“But [we are] involved that cell enterprise may not be eligible for PLI profit, weighing down longer-term margin,” HSBC mentioned.
The dearth of rapid PLI approval for the Gen-3 scooters can be an element. Though the corporate expects to safe these advantages by the second quarter of FY26, HSBC notes that the margin impression, an estimated 2–4% uplift, stays contingent on regulatory timelines.
Valuation, outlook, and dangers
Ola Electrical’s shares have been buying and selling 5.3% decrease at Rs 44.61 on the BSE as of Tuesday afternoon, even because the inventory stays up 2.4% over the past yr. HSBC mentioned the inventory is at the moment buying and selling at 3.8x FY26 estimated EV/gross sales, in contrast with 3.2x for TVS Motor and 4.1x for Bajaj Auto.
The brokerage values Ola utilizing a 10-year discounted money circulate (DCF) mannequin with a weighted common price of capital of 10.8%, factoring in elevated company-specific danger. Its long-term issues embrace stiffening competitors, weaker-than-expected EV penetration, and execution challenges in Ola’s cell manufacturing enterprise.
“We preserve a Maintain score, given decrease confidence on firm estimates,” the report mentioned.
Technically, the inventory is buying and selling above its short-term shifting averages (5-day to 30-day), however stays under longer-term ones (50-day to 200-day). The Relative Energy Index (RSI) stands at 60.2, indicating impartial momentum. In the meantime, the MACD stays unfavourable at -1.6 and under each its sign and heart traces, a bearish sign.
Additionally learn | Ola Electrical shares surge over 17% regardless of posting Rs 428 crore loss in Q1. Right here’s why
(Disclaimer: Suggestions, strategies, views and opinions given by the specialists are their very own. These don’t characterize the views of the Financial Instances)
