Olectra had a decent Q3 performance with all key metrics UP. I wrote a detailed article talking about the performance here
Key highlights
- for 9MFY24, 376 e-buses were delivered (which includes 18 e-tippers). Average selling price of a e-bus ranges from 1.2 to 2 cr. Average selling price of the e-tipper is around 1.3 cr. No subsidies are availed on the e-tipper and it is a high margin product
- Only 51 e-tippers have been sold till date & that too it’s group company (MEIL). Investors should keep track on whether private orders will flow in for the e-tipper
- Order book stood at > 8K e-buses. Olectra plans to deliver the MSRTC order of 5,150 e-buses over the next two FYs. BEST order of 3K e-buses + PMC order of 300 e-buses are under first level of negotiations.
- The company will submit a bid to win orders pertaining to PM Bus Sewa. The tender is not open yet and we should get clarity on how much business Olectra can win in the next few quarters.
- Construction work of the new state of the art plant has commenced with pilot production expected from 2nd February. Expansion will happen in phases with full capacity of 5K e-buses expected to be reached by June / July 2024. Funding for this new plant will be from internal accruals (250 cr) and debt (500 c)
Lowlights
- Guidance has undergone change again. Forecast of e-bus sales for FY24 has been lowered from 1000 - 1200 e-buses to 650 - 750 e-buses. Upto 9MFY24, only 376 e-buses have been sold and it looks unlikely that they’ll be able to sell close to 300 - 350 e-buses in Q4FY24.
- Management has guided to sell 2,500 e-buses for FY25, however given how much they’ve miss their FY24 estimate, I’d heavily discount this number while trying to figure out the FY25 revenue.
- If e-tippers are unable to attract private interest, something could be wrong with the product. Till now, it has been sold only to the Group Company (MEIL)
- The Government wants to convert 8 LAKH diesel buses into electric buses over the next 6 years. Olectra has a current capacity of only 1.5K e-buses per annum. With the new facility, capacity can be expanded to 5K e-buses per annum (scalable to 10K e-buses per annum). However, if Olectra wants to be a top 5 player in the Indian market – it needs a capacity of 40K e-buses p.a. for which MAJOR CAPEX will be required.
- Olectra operates at a cost plus model - which means any reduction in battery prices get passed on to the end customer. With this model, expanding margins will be extremely difficult and to grow profits - they will have to sell more e-buses.
Conclusion
Overall the market opportunity for e-buses is HUGE. What will define Olectra’s future is how quickly it can ramp up production capacities to execute it’s order book. Competition is growing with players like Tata Motors, Switch Mobility, JBM Auto also investing in building capacities.
Disclosure: Invested, tracking to invest more if a significant correction occurs
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