Best EV Stock: Olectra Greentech vs JBM Auto

India is on a path to achieving sustainability with its renewable energy and electric vehicle (EV) targets.

Several policies such as Faster Adoption and Manufacturing of Hybrid & Electric Vehicles (FAME) in India and the Product Linked Incentive (PLI) Scheme, have encouraged EV manufacturing in India.

The government also took steps to replace the government-run buses with e-buses to meet its target.

As a result, the share of e-buses is set to double to 8% in the financial year 2025.

Although e-bus adoption is happening at a much faster pace compared to other electric vehicles, it is still in the nascent stage, providing a massive opportunity for e-bus manufacturers.

Keeping this in mind, we are comparing two major players in e-bus manufacturing - Olectra Greentech and JBM Auto, to see which one is a better EV player.

Business Overview

# Olectra Greentech

Established in 2000, Olectra Greentech is primarily engaged in the business of manufacturing electric buses and composite polymer insulators.

It is one of the largest manufacturers of e-buses and currently has over 1,500 buses running on the Indian roads.

The company has one manufacturing unit with a capacity to produce 1,500 seven-meter, nine-meter, and twelve-meter air-conditioned electric buses.

It also manufactures electric trucks, such as electric tippers, and is setting up charging stations across India.

# JBM Auto

JBM Auto is a leading manufacturer of key auto systems with a growing presence in the e-mobility space.

It produces auto systems, high-level assemblies, electric vehicles and buses.

The company has 17 manufacturing facilities in India.

In the electric buses segment, the company has a portfolio of over ten varieties of buses in 12-meter, 9-meter, and 8.55-meter lengths.

The company also has EV charging infrastructure, which is currently open to the B2B segment.

Particulars	Olectra Greentech	JBM Auto
Market Cap (in Rs billion)*	169.2	272.7
Order Book (in units)**	8,088	4,500

Source: Equitymaster, company presentation|*as on February, 22, 2024|** as of December 2023

Between the two companies, JBM Auto has a higher market cap of Rs 272.7 billion (bn) compared to Olectra Greentech, which has a market cap of Rs 169.2 bn.

However, Olectra Greentech has a higher-order book. It currently has orders of over 8,000 e-buses from various customers. JBM Auto, on the other hand, has orders of around 4,500 buses.

Olectra Greentech has technological support from BYD China until 2025.

JBM Auto, on the other hand, ventured into e-buses in 2019 and has been attracting high orders ever since.

If we compare the performance of the companies on the stock market, Olectra Greentech is leading with gains of 447.2% in the last year, as against JBM Auto, which gave a 295% return.

# Revenue

Although Olectra Greentech's revenue is much less than JBM Auto, the company's revenue has grown at a compound annual growth rate (CAGR) of 45% in the last five years.

The primary reason for such high growth is the company's high execution of e-bus orders. Apart from this, the company's revenue from the polymer insulators segment is also growing on account of the increasing scale of operations.

JBM Auto's revenue has grown by a CAGR of 11.8% in the last five years primarily due to high orders from the auto components industry. Apart from this, the revenue share of the e-bus division has also increased consistently from 2019, which supported the revenue growth.

Currently, the company's revenue from the e-buses division is 12% and is expected to go up to 30% by the end of the next financial year.

Revenue

Net Sales (in Rs m)	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023	5-Year CAGR
Olectra Greentech	1,701	2,005	2,814	5,933	10,908	45.00%
JBM Auto	22,070	19,467	19,820	31,930	38,574	11.80%

Source: Equitymaster

# Profitability

In terms of profitability, Olectra Greentech is again leading when compared to JBM Auto.

In the last four years, the company's earnings before interest, tax and depreciation (EBITDA) have grown at a CAGR of 53.5%, whereas for JBM Auto, the EBITDA grew by a CAGR of 14.7%.

Olectra Greentech's net profit also grew at a CAGR of 49.2% in the last four years, whereas JBM Auto's net profit grew by a CAGR of 16%.

Growth in both e-busses and polymer insulator divisions has helped the company come out of losses and grow its profits at a healthy rate.

For JBM Auto, prudent cost-saving measures and backward integration have supported the profit growth.

Going forward, both companies are likely to show improvement across profit metrics, provided the order execution happens on time.

Profitability

EBITDA (in Rs m)	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023	4-Year CAGR
Olectra Greentech	-152	244	202	832	1,354	53.50%
JBM Auto	2,576	2,302	1,972	3,332	3,986	14.70%

PAT (in Rs m)	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023	4-Year CAGR
Olectra Greentech	-158	135	81	354	669	49.20%
JBM Auto	962	690	493	1,564	1,251	16.00%

Gross Profit Margin	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	-8.90%	12.20%	7.20%	14.00%	12.40%
JBM Auto	11.70%	11.80%	9.90%	10.40%	10.30%

Net Profit Margin	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	-9.30%	6.70%	2.90%	6.00%	6.10%
JBM Auto	4.40%	3.50%	2.50%	4.90%	3.20%

Source: Equitymaster

# Debt Management

To understand whether a company has any fixed financial obligations, you must look at its debt metrics.

The debt-to-equity ratio and interest coverage ratio are two metrics that help us analyse the company's financial obligations and liquidity.

Olectra Greentech is a net debt-free company and has a decent interest coverage ratio of 3.8x.

Despite having a large capex investment, its debt metrics are strong as the company is funding them through internal accruals.

The company acquired 150 acres of land to set up a greenfield manufacturing plant, which will increase the company's production capacity to 5,000 electric vehicles per year from the current 1,500 level.

Apart from this, the company is investing in research and development (R&D) for new product development and expanding to adjacent markets in the EV ecosystem and new geographies.

JBM Auto, on the other hand, has a long-term debt of around 6.3 billion at the end of the financial year 2023, with a debt-to-equity ratio of 0.6x and an interest coverage ratio of 2.3x.

The company invested around Rs 6 bn in capex, majorly funded through debt, in the last three years to expand its manufacturing capacity. It has no major capex plans for the next two years and plans to commercialise the new products it has developed.

Given the significant capex it has done through debt, the debt-to-equity ratio is justified.

However, the company's ability to repay its debt through cashflows should be monitored.

Debt Management

Debt to equity ratio (x)	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	0	0	0	0.1	0
JBM Auto	0.4	0.3	0.3	0.5	0.6

Source: Equitymaster

# Financial Efficiency

To measure how efficiently a company is running its business, we must look at its return ratios.

The two important return ratios are return on capital employed (RoCE) and return on equity (RoE). These ratios tell us how much return the company is generating from the capital invested. A high ratio is considered better.

Financial Efficiency

ROCE	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	-1.10%	4.50%	2.50%	7.40%	14.20%
JBM Auto	23.50%	19.10%	13.90%	19.10%	17.80%

ROE	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	-2.40%	2.00%	1.10%	4.50%	8.00%
JBM Auto	14.90%	9.80%	6.60%	17.40%	12.20%

Source: Equitymaster

In terms of RoE and RoCE, JBM Auto is leading with a high ratio. However, Olectra Greentech's return ratios have consistently improved in the last five years.

The five-year average RoE and RoCE of Olectra Greentech are 2.6% and 5.5%, respectively, whereas for JBM Auto, the ratios are 12.2% and 18.7%.

# Dividends

A company pays dividends from the profits. Hence, a company that consistently pays dividends is considered profitable and stable.

However, if a company doesn't pay dividends, it doesn't mean it is not profitable. It indicates that the company is reinvesting its profits to grow the business.

In terms of dividends, JBM Auto is leading. In the last five years, its dividends grew by a CAGR of 33.2%. The five-year average dividend yield and dividend payout are 0.3% and 7% respectively.

Olectra General, on the other hand, started paying dividends since financial year 2022 and has a dividend yield of 0.1% and dividend payout of 4.9%.

Since Olectra Greentech is investing in capex through equity infusions and internal accruals, the dividend payout is very low.

Dividend

Dividend Per Share (Rs)	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023	5-Year CAGR
Olectra Greentech	0	0	0	0.4	0.4	NM
JBM Auto	0.3	0.3	0.2	1	1.3	33.20%

Dividend Yield	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	0.00%	0.00%	0.00%	0.10%	0.10%
JBM Auto	0.30%	0.40%	0.20%	0.10%	0.30%

Dividend Payout Ratio	Mar-2019	Mar-2020	Mar-2021	Mar-2022	Mar-2023
Olectra Greentech	0.00%	0.00%	0.00%	9.30%	4.90%
JBM Auto	3.80%	4.80%	5.80%	7.60%	12.30%

Source: Equitymaster

# Valuations

A company's actual worth can be measured through its valuations. A high valuation indicates it's very overpriced when compared to its peers, and a low value indicates it is under-priced.

Two important valuation ratios are price to earnings (P/E) and price to book value (P/B).

Valuations	Olectra Greentech	5-Year Average	JBM Auto	5-Year Average
P/E (x)	198.1	65.4	173.5	36.5
P/B (x)	19.2	3.4	24.3	4.9

Source: Equitymaster

The P/E ratios of Olectra Greentech and JBM Auto are 198.1x and 173.5x, respectively, whereas the P/B ratios of the companies are 19.2x and 24.3x, respectively.

Both companies look highly overvalued at the current valuations.

Which EV Stock is Better: Olectra Greentech or JBM Auto?

Olectra Greentech is leading in terms of revenue growth, profit growth, and debt management.

JBM Auto, on the other hand, outpaced Olectra Greentech in terms of financial efficiency and dividends.

Both companies are present in the high-growth EV sector, and they have been taking measures to capture this growth.

JBM Auto ventured into electric buses recently after finding a vast market opportunity in this segment. It invested around Rs 6 bn in capex to expand its manufacturing capabilities to produce electric buses.

It recently commercialised its e-buses and is working on new varieties of buses. The company secured several orders from various clients and is all set to execute them at a rapid pace.

JBM Auto also introduced a new project where it plans to take its e-bus manufacturing facility to 10,000 buses.

Apart from electric buses, it is working on CNG buses and their variants.

Olectra Greentech, on the other hand, recently acquired 150 acres of land to set up a greenfield manufacturing facility. The total capacity of the plant is 5,000 e-buses, which can be expanded to 10,000 e-buses per annum.

With higher capacity, the company's execution capacity will also increase, which is currently at 150 buses a month.

It is also working on new products such as e-trucks, expanding its presence in new geographies, and building its charging infrastructure.

Given the government's push towards adopting electric vehicles and its policies, such as FAME and the National Electric Bus Program, the penetration of e-buses is poised to improve.

Both Olectra Greentech and JBM Auto are well-equipped to benefit from this growth.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...