Olectra Greentech shares surge over 140% in 2023, will the momentum continue? | Mint
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Business News/ Markets / Stock Markets/  Olectra Greentech shares surge over 140% in 2023, will the momentum continue?
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Olectra Greentech shares surge over 140% in 2023, will the momentum continue?

Olectra Greentech, part of the MEIL Group, is India's largest pure electric bus manufacturer and has received large orders for electric buses from various STUs in the country.

 Olectra Greentech currently holds 9,000 electric bus orders, with the same to be delivered in the next 12–24 months.Premium
Olectra Greentech currently holds 9,000 electric bus orders, with the same to be delivered in the next 12–24 months.

In the ongoing small-cap stock rally, many stocks have delivered mind-boggling returns, and one such stock in this lineup was Olectra Greentech. The stock, which was trading at 497 per share at the start of the year (2023), has witnessed an astounding surge of 141% to trade at the current level of 1,196.

This year has marked several milestones for the stock, breaking the 1,000 mark in June and reaching a new historic peak of 1,465 per share the following month.

Also Read: India mulls five-year tax cuts for electric vehicles amid bid to woo Tesla

Olectra Greentech, part of the MEIL Group, is a small-cap stock with a market cap of 9,818 crore. The company is India’s largest pure electric bus manufacturer, having manufacturing facilities in Hyderabad, India. It is India’s first-ever electric bus manufacturer, having manufactured and deployed all variants of electric buses in India.

According to a recent report from domestic brokerage firm Geojit Financial Services, Olectra Greentech is strategically positioned to benefit from the increasing adoption of electric vehicles (EVs).

Also Read: ‘Midcaps, smallcaps too hot; investors should have a large-cap tilt right now’

The brokerage highlighted the company's largest orders from various STUs in India during the last financial year. These include 550 buses from Telangana State Road Transport Corporation (TSTRC), 2100 electric buses from Brihanmumbai Electric Supply and Transport Undertaking (BEST), and 5150 electric buses from Maharashtra State Corporation (MSRTC).

Also Read: Auto sector in Q2 sees better profitability led by raw material savings and cost efficiency, 2HFY24 to be better

In addition, the brokerage pointed out that the company is also eyeing the PM e-Bus program's tender for 10,000 buses, which is likely to open tender by next month, as the Government of India has recently announced. Currently, the company holds 27% of the market share in this segment.

Holds 9,000 electric bus orders

According to the brokerage, Olectra Greentech currently holds 9,000 electric bus orders, with the same to be delivered in the next 12–24 months. As a result, the company is diligently working towards its new Greenfield EV manufacturing facility in Telangana, with an initial capacity of 5,000 vehicles per year and is extendable to 10,000 vehicles per year. This facility is to be operational by Q4FY24.

Also Read: Q2 Results mixed as industrials and OMCs post strong numbers, IT and chemicals drag - 5 key sectoral trends

The company already operates 40 electric buses for BEST in Mumbai, in addition to several STUs like Pune, Hyderabad, Goa, Dehradun, Surat, Ahmedabad, Silvassa, and Nagpur, according to the brokerage.

Technological tie-up to hold key for the company

With the formation of a JV with BYD (Build Your Design) China (BYD is the largest EV manufacturer in the world), and after leading in the commercial run of electric buses, the company is expanding its product line in the e-mobility segment for 3-wheeler electric autos and electric truck tippers, Geojit highlighted. 

The surge in demand for electric tippers is expected to grow going forward as the success of the bus is likely to create impetus for e-tucks. Further, the brokerage stated that the technical partnership between Olectra and Reliance on the Hydrogen Bus project will open the Indian market to a cutting-edge transportation system. The system consists of Type-4 hydrogen cylinders installed on the top of the bus.

Should you buy the stock?

Given the strong order book, capacity expansion, and scalability of multiple powertrains, the brokerage recommends OGL at 45x FY25E EPS, factoring in strong earnings growth with the anticipation of executing the order book on time. While the brokerage said the delay can pose a near-term risk to valuation. Therefore, it recommends an 'Accumulate' rating with a target price of 1,351 apiece.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 18 Nov 2023, 10:37 AM IST
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