SBI Securities shares short-term pick, sees 13% upside in this electric bus maker

Short-term Midcap Stock Pick: An electric bus maker's shares have investors and analysts hooked on Dalal Street. Brokerage SBI Securities is positive on the Olectra Greentech Ltd (OLECTRA) stock, which has risen 12.7 per cent in a month, as of October 1. In that time, the midcap stock has outperformed both its segment and the Sensex index by a significant margin, with gains of 0.9 per cent and 2.1 per cent in BSE Midcap and Sensex, respectively.

Should you buy, sell or hold midcap Olectra Greentech shares?

Olectra Greentech is SBI Securities' fundamental short-term pick for a target price of Rs 1,972.3, which implies a potential upside of 12.7 per cent, as of October 1. The brokerage suggests accumulating the midcap stock in the range of Rs 1,697-1,732.2, with positive views on a number of aspects such as the company's recent financial performance, growth prospects, order book, policy support, and overall corporate governance, according to a research report dated October 1. 

SBI Securities analysts see volatility in raw material costs, especially related to batteries, high competition at the bidding stage, and delay in execution as potential risks to its investment rationale. 

The government's continuous focus on the use of e-buses for public transport is conducive for Oletra Greentech, given the variety of schemes and incentives including FAME, AMRUT, and PM E-Bus Sewa. "The recently launched PM E-Drive scheme by the government will incentivise procurement of 14,028 e-buses by City & State transport corporations. Moreover, the government is also proposing to convert the entire running fleet of diesel and CNG buses across both public and private sector in India to electric in the next 8-10 years. The Ministry of Civil Aviation is also promoting the use of electric vehicles for airport operations," wrote analysts at SBI Securities. 

Olectra Green plans to expand its capacity to 5,000 buses by the quarter ending March 2025, and take it to as high as 10,000 buses by FY26, which is likely to aid its current pace of execution. 

The company has guided for higher execution in 2HFY25 (October-March) on the back of enhanced capacity and improved pace of execution, according to the brokerage.

Olectra's order book looks strong at 10,818 e-buses, including an 5,150-bus order from MSRTC, as of June. 

Its E-Tipper—a heavy-duty commercial vehicle—has the potential to replace the existing ICE fleet of similar vehicles in the construction, mining, and infrastructure industries, wrote SBI Securities analysts. 

Olectra Greentech financial performance

For the quarter ended June 30, Olectra Greentech reported a 10.9 per cent year-on-year increase in its consolidated net profit to Rs 20.7 crore with growth of 47.6 per cent in revenue to Rs 304.2 crore.

The company is yet to announce the date on which it will release its financial results for the quarter ended September 30. 

What is Olectra Greentech and what does it do? 

Olectra Greentech has a manufacturing facility in Hyderabad with a capacity of 200 buses per month, catering to city and state bus corporations in different parts of the country. It also manufactures electric insulators used in the transmission and distribution (T&D) of power.  

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