Shares of Greave Cotton have outperformed markets, rising as much as 105 per cent in the year 2021 so far. In the last one month the counter is up by 35 per cent.
Greaves Cotton is a diversified engineering company and a leading manufacturer of cleantech powertrain solutions (CNG, petrol and diesel engines), generator sets, farm equipment, e-mobility, aftermarket spares and services.
The company augmented its clean technology portfolio in the last mile affordable 2W personal mobility segment with Ampere Vehicles in 2018.
What is driving up the stock?
Analysts say the company is poised to reap the benefits from the government’s push to speed up adoption of EVs through higher incentives.
On Tuesday, the Gujarat government announced its new electric vehicle (EV) policy, which provides a purchase incentive with the segment-wise limits.
“Greaves Cotton is well poised to benefit from faster adoption of electric vehicles (EV) in India, especially in electric the two-wheelers (e-2W) and three-wheelers (e-3W) segments, where the company has a strong portfolio and growth strategies in place,” said ShareKhan by BNP Paribas.
Gujarat said it would also incentivise setting up of charging stations with capital subsidy of 25 per cent, or Rs 10 lakh, whichever is lower.
Likhitha Chepa of CapitalVia Global Research said Greaves Cotton looks well positioned to benefit from the Gujarat government’s policy that focuses on the critical aspects of EV adoption, upfront purchase cost and charging infrastructure.
“The stock has seen some upward momentum in recent times after the government increased the subsidy on electric two-wheelers making them more affordable and planned capex of Rs 110 crore,” she said.
Announcing the March quarter earnings on May 4, the Greaves Cotton management said the company’s new business (e-mobility and non-auto business) continues to grow and contributes 30 per cent to the overall business.
Analyst views
Market watchers are bullish on Greaves Cotton amid the push for electric mobility and the company’s new business initiatives, which is likely to provide the much-needed growth uptick in the long run.
Domestic brokerage ShareKhan has maintained a ‘buy’ rating on Greaves Cotton, with a price target of Rs 194.
“Greaves continues to grow strongly, aided by its timely investments and expansion in e-mobility and non-auto businesses. We expect the 3W industry to gain demand, as the Covid-19 situation normalises and vaccines get rolled out throughout the country,” the brokerage said.
With the company planning to ramp up production capacity and focus on new initiatives, its business outlook appears to be bullish from a medium- to long-term perspective. “One can further 8-10 per cent upside on the counter in the next 12-15 months,” said Chepa of CapitalVia.
