The company also exceeded the market capitalization of ₹50,000 crore just days after listing.

Investors looking to optimize their returns by investing in EV stocks versus other financial investment opportunities were not disappointed.

One of the main reasons for Ola’s increasing success is that the company is one of the best stocks to capitalize on the electric vehicle market opportunity.

However, the company is still making losses and still has a long way to go before it becomes profitable.

The stock is likely to remain in focus this week as the company announced its first-quarter results.

Ola Electric Q1 results

The electric scooter maker reported a 32% jump in sales for the first quarter of fiscal 2025 on Wednesday.

Sales amounted to ₹1,644 crore, while the net loss was ₹350 crore from a loss of ₹270 crore in the same period last year.

The company’s automotive division reported a 34% increase in total revenue to ₹1,720 crore, while the loss after tax for the segment was ₹230 Crores.

Ola Electric’s battery division reported sales of ₹5 Crore for the quarter, with a loss after tax of ₹37 Crores.

During the quarter, the company delivered over 120,000 scooters, representing 77% year-on-year growth. The company recently launched a range of electric motorcycles on August 15.

What happens next?

The company recently launched a new portfolio of motorcycles for the premium and mass market category, which is expected to boost sales in the current quarter.

Ola Electric plans to improve its margins by introducing the Gen 2 platform, which has resulted in lower manufacturing costs.

As for the cell production gigafactory, the first phase was completed by March 2024 with a capacity of 1.4 GWh and since then over 30,000 cells have been produced.

The company now plans to increase its capacity to 5 GWh. Additional investments from the proceeds of the IPO are expected for further expansion.

As far as FAME subsidies are concerned, while the government has cut some benefits, Ola management has pointed out that the industry is evolving and growth can be sustained even with reduced subsidies.

Equitymasters opinion on Ola Electric

Rahul Shah, Co-Head of Research at Equitymaster, says:

Charlie Munger once said that he and Buffett each had three file folders on their desks labeled “Yes,” “No,” and “Too Hard.”

When someone sends them a company or stock to analyze, it ends up in one of these organizers. Any guesses as to where most companies end up? Well, they end up in the “Too Difficult” basket. That’s right.

Buffett and Munger know little or nothing about a large number of US companies. For this reason, they immediately label these companies as “too difficult” and do not waste much time delving deeper into the subject.

This allows them to focus their time and attention on the limited number of companies they understand and where they believe they have an advantage over others.

In other words, they know their area of ​​expertise very well and rarely leave it.

Ola Electric with an issue price of ₹76 per share, has made losses in recent years.

Losses in one or two of the last ten years are understandable to us. However, if the company is consistently losing money and has a history of many losses, then I consider it outside my area of ​​expertise and throw it into the “too difficult” pile.

Therefore, when I looked at the company’s income statement, I saw that all three years up to fiscal 2023 were losses, and that was something I was not happy with.

Ola Electric may have a significant market share and huge revenue, but if the company has not figured out how to convert that revenue into profitability and cash flows, then I think that is a big red flag and I tend to avoid such companies.

Therefore, Ola Electric falls into the “too difficult” category.

Of course, it’s entirely possible that the stock will prove to be a great long-term investment. But these are investments, not the Olympics. You don’t get any extra points for trying to make the harder jump.

If you can get the same return with a simple and easy-to-understand investment, why choose a more difficult investment?

For more on Ola Electric, read Tanushree Banerjee’s editorial where she talks about the impact of the card wars on Ola.

This is how Ola Electric’s share has performed recently

Ola Electric conducted its IPO at an issue price of ₹76. On the first day, August 9, 2024, the share price ended at ₹91.2.

Over the next four days, the share price recovered and is currently trading at ₹133 per share.

Here is a table comparing Ola with its competitors –

View full image

Have fun investing!

Disclaimer: This article is for informational purposes only. It does not constitute a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com