HDFC Securities has reaffirmed its BUY rating on Ather Energy, citing the electric two-wheeler (E2W) manufacturer’s strong operational execution, rapid retail network expansion, and improving profitability trajectory. The brokerage has raised the Ather Energy target price to INR 837, implying a 23% upside from the current market price of INR 680 as of 19 November 2025.

Ather Energy Q2 FY26: Volume Growth and Margin Inflection

Ather Energy reported robust momentum through FY 2026, delivering 66,000 units in Q2 FY26, marking a 67% year-on-year (YoY) and 42% quarter-on-quarter (QoQ) increase. The company’s total income surged 57% YoY and 40% QoQ to INR 940.7 crore, supported by strong demand and widening distribution.

The company’s EBITDA margin improved sharply to -10%, a 1,100 bps YoY and 600 bps QoQ improvement, even after accounting for one-time impacts worth INR 192 million (related to non-claiming of incentives) and INR 50–60 million in logistics costs for rare earth magnets. Adjusting for these, HDFC Securities estimates the margin loss would have been closer to -12%.

Ather’s Adjusted Gross Margin (AGM) stood at 22% in Q2 FY26, with a 21% AGM excluding incentives, reflecting a steady expansion of 300 bps YoY, aided by cost engineering, reduced COGS per unit (down 19% since FY24), and improved non-vehicle revenue contributions.

Expanding Retail Footprint and Market Leadership

The company continues to aggressively expand its retail presence, adding 78 new stores in Ather Energy Q2 FY26 to reach 524 experience centers nationwide—more than double its count from the previous year. The company expects to maintain this momentum through FY26, with a focus on “Middle India” markets such as Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Odisha.

This expansion has translated into significant market share gains:

• 17.4% national market share in Q2 FY26, up from 10.7% a year earlier.
• 25% market share in South India, reinforcing its leadership in the region.
• 14.6% in Middle India, led by Gujarat and Maharashtra.
• 10% in the Rest of India, up nearly 3x from Q2 FY25.

Path to Profitability

Management maintains that the company’s current portfolio is capable of progressing toward profitability without relying on new product launches. The upcoming low-cost EL Platform, expected from FY27/FY28, is seen as a catalyst for the next wave of growth rather than the breakeven point.

The company is transitioning further into LFP (Lithium Iron Phosphate) battery chemistry, which currently forms a growing portion of its mix, reducing cost pressures and enhancing battery safety and longevity. Additionally, operating leverage from higher volumes and an improving non-vehicle revenue mix (12% of revenue)—driven by software subscriptions like AtherStack Pro and fast-charging services—is expected to drive sustained EBITDA improvement.

Ather Energy Target Price: Financial and Valuation

HDFC Securities forecasts a persistent improvement in EBITDA margins over the medium term, supported by:

• Scaling volumes and continued value engineering.
• Portfolio diversification via the EL Platform.
• Transition to LFP batteries and improved sourcing efficiencies.
• Higher non-vehicle revenue contribution.

The brokerage values the company at 6.0x EV/Sales, arriving at a Ather Energy target price of INR 837, up from the earlier INR 748. It expects FY27E and FY28E EPS to grow +39% and +89%, respectively.

Key estimates (in INR crore):

Industry Outlook

Ather Energy expects the E2W industry to grow at 4–5x the pace of ICE two-wheelers in the coming years, driven by product innovation rather than total cost of ownership. States such as Madhya Pradesh, Bihar, Punjab, Kerala, and Rajasthan are expected to lead the next phase of adoption. The company also highlighted improving industry discipline around pricing and discounting—a trend that should enhance long-term profitability across the sector.

HDFC Securities Coverage on Ather Energy: Analyst Take

HDFC Securities analysts Hitesh Thakurani and Shubhangi Kejriwal underscored Ather’s “superior execution” and consistent margin improvement, positioning it as their top pick in India’s electric mobility space. They emphasized that Ather’s strategy—anchored in engineering depth, brand strength, and disciplined expansion—continues to “lower EBITDA loss while scaling market share,” setting a clear roadmap to profitability.

Summary: With strong operational traction, rising market share, expanding distribution, and a visible path to profitability, HDFC Securities’ bullish stance on Ather Energy underscores growing investor confidence in India’s EV transition story.

Rating: BUY
CMP (19 November 2025): INR 680
Target Price: INR 837
Upside: ~23%
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