CLSA has initiated coverage on Ather Energy with an 'Outperform' rating, setting a 12-month target price of Rs 1,450. The stock saw a 4% increase this morning, trading at Rs 993.
CLSA's core thesis revolves around Ather's strategic positioning in India's evolving two-wheeler market, where electric scooters are expected to grow at a 40% compound annual rate between FY26 and FY30, compared to just 4% for internal combustion engine two-wheelers. The brokerage anticipates a fourfold volume growth over the next four years, driven by cost deflation and premiumisation.
On the cost front, Ather's new EL platform is a 'full-stack re-engineering' that transitions from aluminium to a steel unibody frame, simplifying the drivetrain and integrating the motor controller and charger. This architecture could reduce the bill of materials by 10–15%, positioning EL as a margin design platform rather than merely cost-cutting.
“We believe Ather can double in three years.”
CLSA
Ather's premiumisation strategy involves targeting high-performance scooters with integrated hardware-software stacks, initially priced above Rs 150,000, and later expanding into the Rs 100,000–120,000 range. This approach allows Ather to broaden its market reach without compromising brand equity or engaging in price wars.
Beyond hardware, Ather's proprietary AtherStack software is highlighted as a key profitability driver, with a 90% attach rate for paid packages. Non-vehicle revenue, including software, charging, service, and spares, comprises 13–14% of sales and offers higher gross margins than vehicle sales.
“With a c.90% adoption rate, Ather Stack is a product, not an add-on.”
CLSA
Although Ather is currently loss-making with an EBITDA margin of around minus 6%, CLSA expects an EBITDA breakeven by FY28, with margins improving to 14–14.5% by FY31–32. Key risks include slower-than-expected electric two-wheeler adoption and increased competition from legacy manufacturers and new entrants.
Background
CLSA draws parallels between Ather's current phase and TVS Motor's past re-rating, driven by premiumisation and margin expansion. The brokerage believes Ather's positioning as a premium, software-enabled EV platform justifies a 40x PE multiple, consistent with historical sector benchmarks for companies undergoing structural transformation.
Looking ahead, investors should monitor Ather's ability to achieve its growth targets amid evolving market dynamics and policy changes. CLSA's optimistic outlook hinges on Ather's successful navigation of these challenges to realise its potential stock rally to Rs 1,450.
