HSBC Begins Coverage of Ather Energy, Recommends ‘Buy’

After HSBC began covering the electric two-wheeler manufacturer with a ‘Buy’ rating, shares of Ather Energy rose nearly 4% to INR 358.05 in morning trading on the BSE.

Ather, which was established in 2013 as a startup incubated by IIT Madras, is an escooter original equipment manufacturer (OEM) in India, competing with Ola Electric, Bajaj Auto, TVS Motor, Hero MotoCorp, Honda, and others.

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Ather received a target price (TP) of INR 450 from the brokerage, reflecting a 30% increase from its most recent closing price.

The brokerage report described Ather as a good company operating in a challenging industry, noting that its product quality and technological leadership are hard to duplicate, even for competitors with substantial financial resources.

Following the spike in its stock price, Ather’s market capitalisation reached INR 12,695.29 Cr, with over 20 Lakh shares exchanged on the exchanges by 12:47 PM.

In May, Ather entered the stock market, with its shares being listed on the BSE at a premium of 1.57%.  Ather’s shares debuted at INR 326.05 each, compared to the IPO issue price of INR 321.

On the NSE, the stock debuted at INR 328, reflecting a premium of 2.18% over the IPO price.

When this was written, Ather’s trade value was 340.85, reflecting a decrease of 1.3%. Meanwhile, the benchmark indices were performing positively.  At 12:47 PM, NSE Nifty rose by 0.15% to reach 24,857.10, while BSE Sensex increased by 0.18%, reaching 81,486.87.

As per the Vahan database, Ather ranks as the fourth largest EV two-wheeler manufacturer in India, holding a 14% market share of total e2W sales in Q1 FY26.

The brokerage report noted that the planned launch of Ather’s new EL production platform in August, aimed at the economy scooter segment, should provide a tailwind for market share.

Ather’s volumes have experienced a CAGR of 77% from FY22 to FY25, and it reported an improvement in the EBITDA margin from -64% to -26%.

HSBC pointed out that Ather, without a production-linked incentive (PLI) subsidy, achieved a 19% adjusted gross margin in FY25, although its EBITDA margin was -26% because of reduced volumes.

The brokerage firm anticipates a compound annual growth rate (CAGR) of 47% for revenues from FY25 to FY28 and expects EBITDA to reach breakeven by the fourth quarter of FY27.

“For FY28, our projections indicate a gross margin of 28% and an EBITDA margin of approximately 4%, with the monthly volume run rate expected to reach around 45,000, an increase from the current figure of about 14,000.  It noted that the first phase of the company’s new plant in Maharashtra, which has a capacity of 500,000, will be ready to handle additional volumes by that time.

It should be noted that in the EV market, automotive giants TVS Motor and Bajaj Auto continued to dominate in June, with their monthly vehicle registrations remaining above 20K.

In June, total EV sales in India experienced a decline of approximately 7% compared to May, and this decrease was also evident in the sales volume of electric two-wheelers.

The brokerage report indicates that the e2W penetration rate has been stable at approximately 5-7% over the past two years.

“Based on the diffusion of innovation model, which explains the spread of new ideas and technologies through cultures, we now expect e2W penetration to reach around 20% by FY30,” the report stated.

In June, Ather’s sales of electric two-wheeled vehicles reached 13,617.