Olectra India – EV Multibagger

Olectra Greentech Ltd. is a company operating since 1992 which engages in the manufacturing and sale of electric buses and composite polymer insulators.

Olectra have Joint Venture between BYD (China) on which Warren Buffett is an Investor. BYD is eyeing on US Electric Bus Market which will attracted lot of good investors & help mutual technical alliance of Improved Batteries on the Indian counter side.

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Olectra India Multibagger 2021

Website https://olectra.com/

Bus Video https://www.youtube.com/watch?v=h9NR6rh6o-w

CMP: 220 (Recommended Price 150)

Current News: Adani group Acquisition Proceedings (Bull News)

Products

The company produces the Ebuses in series Ebus K6, Ebus K7, Ebus K9. The K9 EBus can accommodate up to 49 passengers costing around Rs 2.5 crore and can travel up to 300 kms on a single charge.

The company also produces EHV composite insulators insulators have been introduced as a good alternative to ceramic and glass insulator.

Performance

Company is having a Flat P&L due to the Automobile Sector de-growth in COVID times. 

Positives

Indian Automobile Sector is in Revival Path due to the Budget 2021 Focus on Infrastructure & Vehicle Scrappage Policy along with the COVID lock down relaxing.  This will boost the sales of Automobile players including our company.

India is undergoing Expansion in Adaption on Electric Vehicles due to the Go Green Initiatives leading to Less Pollution & Clean Environment coupled with the Increased Affordability & Low Prices. 

In order to encourage the use of electric vehicles the GST Council of India has brought down the GST rate on electric vehicles (EVs) and Charging Stations to 5 per cent.  Company is expected to cross the 1000 EV in India this year.

It may take a year or two to get the Appropriate Boost for this sector through More Tax Reductions, Battery Subsidies, Availability of Electric Chargers throughout the country. The company is surely to benefit from these.

Company has unique R&D infrastructure and possess a High-Performance Battery for Long-distance charging along with Low Maintenance.

It is the Niche Manufacturer of Energy Efficient Intercity Coach Bus which have continued Traction from Metro cities.

Company is Investing in Charging Infrastructure for the Lithium-ion Variations through Alliance with Bus Depots & Terminals in Metro Cities.  These investments will further boost the count of buses used by Metros.

Warren Buffett is the Investor in BYD(China) which is the Technical Alliance in US.  This shows the Credibility of this Sector & Company as a whole.

Company recently won 500 EV buses order from various state governments in Pune, Dehradun, Gujarat, Karnataka.  The Market Share of the Company is 50% compared to Tata Motors & Ashok Leyland rivals.

Zero Debt Company shows No Stress in the P&L of the company during tough times.    

Promoter Holdings are good at 59% with Whopping Increase of 22% in the recent years witnessing past week purchases too.

No bad reputation for Promoters. No frauds found in our research.

Negatives

Budget 2021 was not fully supporting the EV Segment due to Loss of Revenue from Petro, Gas & Other Excise duties.  It may take a year or two to get the Appropriate Boost for this sector through Tax Reductions, Battery Subsidies, Availability of Electric Chargers throughout the country.

Government may be Reluctant in Fully Replacing Fuel Vehicles as they are Good Source of Revenue through Taxes & Excides Duties.

Presence of Big Competitors like TATA Motors, Ashok Leyland are a Threat to the company. Arrival of Global Players like Tesla, Nikola in the segment will further increase the Stress on Bottom Line.

P&L showing presence of Other Income to mark the Profit on Green side.   Typical Ratios like ROCE, ROE is not good at the moment & Stock witnessed heavy crash due to the bad times. The Balance Sheet Reserves are increasing at slow rate due to the current issues.

This Multibagger is Not a Traditional Value Investing pick.

Intrinsic Value

Considering the Aggressive EPS Growth of 30% past 2021 is at 70% Discount to Intrinsic Value. Intrinsic Value Calculator

The PB Ratio is at 2X.

Checklist

Following are the Value Investing checklist.

GROWTHCompany is not witnessing growth in the recent years due to high cost of EV buses compared with competitors.
VALUECompany is Trading a Reasonable Value considering the PB valuation.
DEBTLow Debt makes it a Safe Bet for long-term.
INTEGRITYPromoters are Prudent & No Frauds found in our checks.
DELTAStock Price is growing in the past along with EPS growth & macroeconomic events.
TRAILINGTrailing Year & QR have flat-returns due to COVID issues.  This should be temporary.
ISSUESMicrocap Stocks are in High-Risk High-Return category so be Cautious of Investing & Re-Investing during down times.

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