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E-mobility business to drive future growth…

Recent announcement by Department of Heavy Industries (DHI) for modification of the scheme for Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME-II), including increasing the demand incentive to ₹15,000 per KWh from the earlier uniform subsidy of ₹10,000 per KWh for all EVs (including E-2W, E-3W) including plug-in hybrids and strong hybrids, except buses and the limit on the incentives for an E-2W is now capped at 40% of its price, twice the previous limit of 20%.

Besides these incentives, various state governments are providing additional incentives to drive faster EV adoption, such as additional subsidies on EV purchase, increased outlay for EV infrastructure, promoting EV start-ups, and exemptions from registration and other fees that are applicable to normal internal combustion engine (ICE) vehicles. Ampere has passed on the benefits to the customers by reducing prices by 12% to 14% for its high speed Models like Zeal and Magnus E-2W vehicles which will further aid penetration and propel growth for EV business of Greaves Cotton (GCL).

Focus on EV product mix, New EV launches to gain market…

The management has shared a | 700 crore capex plan for 10 years (capex + working capital) on a proportionate basis. Further, the company is continuously working on increasing localisation with the only major import being lithium ion cells. Going ahead, increasing dealer network, Ampere Vehicle Finance along with continuous innovation and product improvement should propel future growth in e-mobility segment.

GCL is targeting to focus on new product launches under Ampere (E-2W) and Bestway (E-3W) to expand its product portfolio of towards high speed vehicles, increasing distribution reach and taping more cities to tap EV demand. Post FAME –II modifications, Ampere pass on the benefits to customer by reducing prices by 12% to 14% for its high speed, Zeal and Magnus E-2W vehicles which will further aid penetration and propel growth for these Models.

Valuation & Outlook

The revision in the FAME (II) policy, increasing the subsidy by 50% per KWh, likely to accelerate electric two-wheelers sales for Ampere Vehicles, a subsidiary of Greaves cotton. Ampere has more than half a dozen electric two-wheelers in its portfolio and with product for every customer price point in the affordable mobility and it could further gain market share with new launches at varied price points.

Electric mobility and new initiatives business of Greaves Cotton may provide much need growth uptick in long term amid languishing auto engine volumes. Consequently, we value GCL’s base business at 19x FY23E EPS and Ampere, Bestway at 5x FY23E Sales and maintain BUY rating on the stock with a revised target price of | 210 (earlier TP | 160).

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