Electric mobility in India is no longer just a vision—it’s a transition in motion. Riding the currents of this structural transformation, HDFC Securities has initiated coverage on Ather Energy with a ‘BUY’ rating and a target price of INR 409, implying a 30% upside from its current market price of INR 313 (as of 13 June 2025). The brokerage’s bullish stance on the electric two-wheeler (e-2W) maker stems from its solid product pipeline, R&D-driven DNA, and strong execution strategy in a highly dynamic yet nascent EV industry.
Why the Brokerage is Bullish on Ather Energy
1. Focused EV Pure-Play with Tech at the Core
Unlike legacy ICE (internal combustion engine) players dabbling in EVs, Ather Energy is built ground-up as an EV OEM. Its strategic commitment to in-house R&D and vertically integrated systems (hardware + software) gives it a first-mover advantage, especially with Atherstack, a proprietary smart scooter OS with a growing high-margin revenue stream.
2. Fast-Growing Market Share in an Expanding Industry
With a 13.4% share in retail e-2W sales as of May 2025, Ather is the fourth-largest player in the segment. HDFC Securities forecasts this to rise steadily, hitting 25.2% of the e-2W market by FY40, driven by product expansion, geographic diversification, and sharper marketing.
3. Scalable Manufacturing Backbone
The company currently operates at 4,20,000-unit annual capacity with a peak utilization of 56% (Oct 2024). Anticipating future demand, Ather is setting up a 1 million-unit facility in Shambhajinagar, split into two phases. Phase 1 (5,00,000 units) is expected by March 2027.
4. Margin Levers Are Unlocking
Ather’s shift from NMC to LFP battery cells is projected to cut material costs by 15%, improving gross margins by 207 basis points. Additionally, the EL platform, optimized for cost and volume production, and growth in accessories and software add-ons (like smart helmets and Atherstack subscriptions) are expected to support margin recovery.
5. Path to Profitability in Sight
Though EBITDA-negative today, Ather is expected to break even by FY30, supported by:
- Improved unit economics
- Market consolidation
- Better localization
- Software & accessories sales contribution
Growth Outlook: Outpacing the Industry
| Metric | FY25 | FY30E | FY40E |
|---|---|---|---|
| Domestic e-2W Penetration | 6.1% | 13.7% | 54.8% |
| Ather e-2W Market Share | 13.5% | 17.9% | 25.2% |
| Revenue (INR Cr) | 2,255 | 8,609 | 86,673 |
| EBITDA Margin | -25.8% | 0.4% | 9.5% |
| EPS (INR) | -21.8 | 14.0 | 127.4 |
Risks Highlighted by the Brokerage
While bullish, HDFC Securities doesn’t shy away from flagging potential risks:
- Promoter dilution: Founders Tarun Mehta and Swapnil Jain now own ~11% post-IPO, which raises questions about long-term leadership commitment.
- Hero MotoCorp’s control risk: With ~30% stake, Hero could pursue management control, potentially altering Ather’s innovation-centric DNA.
- Regulatory: A GST hike on EVs (from 5% to potentially 18% or 28%) could dent margins and impact affordability.
- Supply-side bottlenecks: China’s recent export restrictions on rare earth magnets may hamper production continuity.
IPO Recap & Utilization of Funds
Ather Energy raised INR 2,980.76 crore via IPO in April 2025, with the issue priced at INR 321 per share. The offer comprised a fresh issue of INR 2,626 crore and OFS of 11.1 million shares (INR 354.76 crore). Currently, Ather Energy shares are trading at INR 321 per share, trading flat at IPO price. The IPO proceeds are being strategically allocated:
- INR 930 crore for the new factory
- INR 750 crore for R&D
- INR 300 crore for marketing
- INR 40 crore for partial debt repayment
Valuation Rationale
Valuing loss-making EV players is inherently complex. Yet, HDFC Securities applies a 3.5x EV/Sales multiple on FY27 blended revenues, leading to a target value of INR 15.25 crore and a price target of INR 409 per share. The valuation implies a premium over peers like Ola Electric and is in line with its superior growth trajectory and market positioning.
In bull and bear case scenarios, the stock is valued at INR 504 and INR 229 respectively—offering an asymmetric risk-reward profile.
Final Take
The brokerage sums it up aptly: “When an industry goes through a once-in-a-hundred-years kind of transition, it augurs well to invest early in what could emerge as one of the strong leaders of the transition.”
With a first-mover advantage, robust product pipeline, accelerating scale, and technology-driven culture, Ather Energy appears well-positioned to ride the EV wave over the next decade. Investors with a medium-to-long-term horizon may find this an opportune entry point.
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