Top 5 Electric Bus Manufacturing Stocks in India

What word comes to mind when you think of electric vehicles?

For many of us, it might be "electric car" or "electric scooter," but the unsung heroes of this industry are the electric bus manufacturers.

The passenger vehicle segment of the industry is already quite crowded, so let's take a closer look at how the commercial electric vehicle industry is currently functioning.

Going back to the beginning, in 2019, the Indian government introduced the second phase of the 'Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles' (FAME).

This is an incentive scheme, which aims to promote the adoption of electrified vehicles through both supply and demand-based subsidies.

One of the main goals of this incentive scheme was to electrify public transport, given the significant reduction in fossil fuel consumption in electric buses.

This policy makes sense, especially in a country like India, which is home to some of the most polluted cities in the world. According to a study, 22 of the 30 most polluted cities are found in India.

Environmental concerns are not the only driving force behind the electrification of public transport. India, as one of the largest oil importers, is highly vulnerable to fluctuations in oil prices, which can have a significant impact on its economy.

Despite the challenges faced by policymakers and implementers, the electrification of public transport could be a game-changer for the industry. This presents a golden opportunity for electric bus manufacturers and potential investors, especially with the support of the government.

For those looking to capitalise on the potential growth of the EV bus sector, here are five stocks worth keeping an eye on.

#1 Tata Motors

First on our list is the pioneer in EVs in the Indian automotive industry, Tata Motors.

Tata Motors is a global leader in automobile manufacturing, with a diverse portfolio that includes cars, SUVs, buses, trucks, pickups, and other defence vehicles.

The company has a large presence in India and also exports vehicles to more than 100 nations. It has various partnerships with other automakers, including Fiat, Jaguar Land Rover, and Daimler.

The firm alone accounts for more than 70% of the electric car market in India. Tata was able to capitalise on the EV race early, and now it is bearing fruit.

Tata Motors Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-13.50%	-4.30%	11.50%	24.30%	26.60%
Gross Profit Margin (%)	36%	37%	35%	35%	38%
Operating Profit Margin (%)	7.00%	13.00%	9.00%	9.00%	14.00%
Net Profit Margin (%)	NM	NM	NM	0.80%	7.30%
Return on Capital Employed (%)	NM	6.00%	1.00%	6.00%	20.00%
Return on Equity (%)	NM	NM	NM	5.90%	37.50%

Data Source: Screener.in

Coming to its financials, from 2020 to 2024 the company has experienced significant growth. Sales have increased at a 5-year compounded annual growth rate (CAGR) of 8%, while the net profits have risen by 93%.

Despite the massive increase in the five-year earnings of Tata Motors, the return on capital employed (RoCE) and return on equity (RoE) have remained subdued at 6.6% and 5.8%, respectively.

In FY24, the company has managed to grow its revenue by 26.6% YoY, while the net income for the for the year has grown tremendously by 12 times, versus that of FY23.

Tata motors' growth in the business was led by the sales of 73,800 EVs during FY24. It has also crossed a milestone of 150,000 cumulative EV production, in FY24.

During FY24, the company deployed more than 1,700 electric buses, as of March 2024, the company has more than 2,600 electric buses on the road covering more than 140 million (m) km cumulatively.

The company has orders for around 1,200 more buses to be supplied this year. The current order book stands at approximately 133,000 units, a decrease from around 150,000 units in the last quarter.

Tata Motors anticipates that its earnings before interest and taxes (EBIT) margin for FY25 will likely remain within a similar range to FY24, around 8.5%.

Despite expectations of increased variable and fixed market expenses due to planned investments, the company expects these costs to be offset by a full year of increased capacity of certain models.

However, the company retained its FY26 EBIT margin guidance of 10%.

In the commercial vehicles segment, Tata Motors expects volumes to either remain stagnant or decline in FY25, with a slow start in Q1 followed by a recovery in demand from Q2 onwards.

Additionally, the company foresees cost pressures, particularly in commodity costs in Q1 and beyond, which it plans to mitigate through price adjustments.

For the passenger vehicle segment, Tata Motors predicts a moderation in the industry growth rate to under 5% in FY25.

This projection is based on the anticipated depletion of pent-up demand and a high base effect from the robust volume growth in FY23 and FY24.

While the EBITDA margin for the passenger vehicle internal combustion engine business improved to 9.4% in FY24 from 8.5% in FY23, the margin for EVs remained negative (-1.4% in FY24 versus -0.5% in FY23).

At present, the stock trades at a PE of 9.9x, a discount to its 5-year median PE of 19x.

#2 Eicher Motors

Second on the list is Eicher Motors.

Eicher Motors is a company of the Eicher group in India and a leading player in the Indian automobile industry and the global leader in middleweight motorcycles.

It is the owner of the iconic Royal Enfield brand which is focused on mid-sized motorcycles (250-750 cc). Classic, Bullet, Himalayan are some of the brands that come under its Royal Enfield brand.

It is sold in 60+ countries globally. It also provides protective riding apparel, urban casual wear, and motorcycle accessories and parts.

The company also has a joint venture with Sweden's AB Volvo to create Volvo Eicher Commercial Vehicles Limited (VECV). VECV is engaged in truck and bus operations, auto components business, and technical consulting services business.

Eicher Motors Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-6.60%	-4.70%	18.10%	40.20%	14.50%
Gross Profit Margin (%)	45.00%	41.00%	42.00%	43.00%	46.00%
Operating Profit Margin (%)	24%	20%	21%	24%	26%
Net Profit Margin (%)	20.00%	15.50%	16.30%	20.20%	24.20%
Return on Capital Employed (%)	25%	17%	18%	27%	31.10%
Return on Equity (%)	18.30%	11.80%	13.30%	19.40%	22.20%

Data Source: Screener.in

Coming to its financials, from 2020 to 2024, the company's sales have increased at a 5-year compounded annual growth rate (CAGR) of 11%, while the net profits have risen by 13%.

Led by the increase in the five-year business, the return on equity (RoE) and return on capital employed (RoCE) have stood at 18.8% and 23.6%, respectively.

In FY24, the company achieved a 14.4% YoY revenue growth and a notable 37% increase in net income compared to FY23. It also achieved its highest-ever revenue from non-motorcycle segments, underscoring its strategic emphasis on diversification beyond motorcycles.

The company has delivered over 230 electric buses and 75 Eicher Pro 2055 EV trucks, demonstrating significant strides in EV deliveries and performance tracking.

Additionally, it achieved record motorcycle sales volumes in India with 912,000 units sold for the year, alongside 77,209 units sold in international markets.

Over the past eight years, the company has seen steady growth in international revenue. With confidence in scaling production rapidly as needed, management signals a positive outlook and emphasizes responsive capacity expansion to meet market demands.

At present, the stock trades at a PE of 33x, a slight discount to its 5-year median PE of 35.8x.

#3 Ashok Leyland

Third on the list is Ashok Leyland.

Ashok Leyland is the flagship Company of the Hinduja group, having a long-standing presence in the domestic medium and heavy commercial vehicle (M&HCV) segment.

Headquartered in Chennai, the company has a strong brand and well-diversified distribution and service network across the country and has a presence in 50 countries, it is one of the most fully integrated manufacturing companies.

It is the second largest manufacturer of commercial vehicles in India in the medium and heavy commercial vehicle segment, fourth largest manufacturer of buses in the world and the fifteenth largest manufacturer of trucks globally.

Ashok Laylend Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-33.90%	-11.40%	34.90%	58.80%	9.90%
Gross Profit Margin (%)	39%	38%	33%	31%	36%
Operating Profit Margin (%)	15.00%	13.00%	11.00%	12.00%	17.00%
Net Profit Margin (%)	9.00%	5.00%	6.00%	11.00%	15.20%
Return on Capital Employed (%)	25%	17%	18%	27%	31%
Return on Equity (%)	5.90%	NM	NM	15.90%	29.90%

Data Source: Screener.in

Coming to its financials, from 2020 to 2024, the company has experienced muted growth. Sales have increased at a 5-year compounded annual growth rate (CAGR) of 7%, while the net profits have risen by 4%.

Led by the muted five-year business, the return on equity (RoE) and return on capital employed (RoCE) have remained subdued at 9.3% and 2.4%, respectively.

In FY24, Ashok Leyland achieved a 10% revenue growth and an impressive 98% increase in net profit, marking a record year with all-time high numbers in revenue, EBITDA margins, and profit.

This success underscores its focus on price realisation, operational efficiency, sourcing, and achieving a balanced revenue mix.

Going forward, the company aims to enhance its market share in both the trucks and bus segments, with a medium-term target of achieving 35% in the MHCV segment.

It currently holds the second position in the 2 to 3.5 tons HCV segment with over 20% market share and plans to launch 6 new products in FY 25 to bolster its position further.

The company currently holds approximately half of the LCV market in India and plans to expand its LCV product portfolio to cover 70-80% of the market in the coming years.

This expansion aims to leverage the significant growth potential in LCVs and build upon improved market share in commercial vehicle exports from India, despite challenges in SAARC and African markets.

This reflects the company's successful strategy of local market-focused product development and strong distribution relationships. It is preparing to supply 950 electric buses to Delhi and 320 buses to Bangalore.

At present, the stock trades at a PE of 27.8x, a premium to its 5-year median PE of 26.2x.

#4 JBM Auto

Fourth on the list is JBM Auto.

JBM Auto Ltd is in automotive business that manufactures and sells sheet metal components, tools, dies & moulds, and buses including sale of spare parts, accessories and maintenance contract for Buses.

The company's business divisions encompass a wide range of sectors, including auto component & systems, buses & electric vehicles, EV aggregates, EV charging infrastructure, renewables, and environment management.

Company has 17 manufacturing facilities in Haryana, UP, Maharashtra, Gujarat, MP, Rajasthan, Tamil Nadu.

The clientele of the company includes Ashok Leyland, Daimler, Nissan, Renault, FCA, Ford, Toyota, Volvo, Volkswagen, Tata, Honda, Escorts, Mahindra, Honda, Force, etc.

JBM Auto Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-11.80%	1.80%	61.10%	20.80%	29.90%
Gross Profit Margin (%)	30%	30%	28%	30%	29%
Operating Profit Margin (%)	12%	10%	10%	10%	12%
Net Profit Margin (%)	3.50%	2.50%	4.90%	3.20%	3.90%
Return on Capital Employed (%)	12%	9%	14%	12%	15%
Return on Equity (%)	9.80%	6.60%	17.40%	12.10%	16.60%

Data Source: Screener.in

Coming to its financials, from 2020 to 2024, the company's sales have increased at a 5-year compounded annual growth rate (CAGR) of 18%, while the net profits have risen by 13%.

The return on equity (RoE) and return on capital employed (RoCE) have remained subdued at 9.3% and 2.4%, respectively.

In FY24, JBM Auto achieved a remarkable 30% revenue growth and 55% increase in net profit.

Recently, the company secured significant milestones, including a partnership with Muon India to deploy over 2,000 buses, starting with an initial order for 43 buses delivered within a month.

Another recent development is that JBM Ecolife Mobility, a subsidiary of JBM Auto, has secured a significant order worth Rs 75 bn for 1,390 electric buses.

Additionally, its subsidiary JBM Ecolife Mobility won a Rs 75 bn order for 1,390 electric buses under the PM-eBus Sewa Scheme, tasked with complete procurement, supply, operation, maintenance, and infrastructure development. The company is tasked with executing the order within the next 12 to 18 months.

With a robust order book and strong commitments in electric bus manufacturing, JBM Auto is well-positioned for future success.

At present, the stock trades at a PE of 136.5x, a huge premium to its 5-year median PE of 39.8x.

#5 Olectra Greentech

Fifth on the list is Olectra Greentech.

Olectra Greentech is primarily engaged in the manufacturing of composite polymer insulators and electrical buses. It has more than 8 years of experience in manufacturing and commercialisation of E-buses.

It manufactures seven-meter, nine-meter and twelve-meter models of the air-conditioned electric buses in India

Manufacturing facilities located in Hyderabad, with current manufacturing capacity of 1,500 units per year.

Olectra Greentech Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	17.90%	40.30%	110.80%	83.90%	5.80%
Gross Profit Margin (%)	46%	36%	29%	25%	29%
Operating Profit Margin (%)	3%	7%	14%	13%	14%
Net Profit Margin (%)	7.00%	2.90%	5.90%	6.10%	6.90%
Return on Capital Employed (%)	2%	2%	8%	13%	15%
Return on Equity (%)	2.00%	1.10%	4.50%	8.00%	8.60%

Data Source: Screener.in

Coming to its financials, from 2020 to 2024, the company has experienced a massive growth. Sales and net profit have increased at a 5-year compounded annual growth rate (CAGR) of 47% each.

The return on equity (RoE) and return on capital employed (RoCE) have remained subdued at 4.8% and 8.1%, respectively.

In FY24, Olectra Greentech secured significant orders, including 5,150 e-buses from MSRTC and 3,000 e-buses from BEST, Mumbai.

The company is constructing a greenfield electric vehicle manufacturing plant on 150 acres, aiming to produce electric buses and other EV products.

Olectra buses have travelled over 200 m km across India, demonstrating their reliability and efficiency.

The company began selling E-Tippers in Q4 FY23 and has delivered a total of 1,695 electric buses and 51 tippers by March 31, 2024.

It is establishing a new greenfield plant on 150 acres of land acquired from Telangana State Industrial Infrastructure Corporation Limited in Hyderabad. The plant will initially have a capacity of 5,000 units per year, scalable up to 10,000 units per year.

Looking forward, it anticipates producing over 2,000 buses in FY25, with a target to increase production capacity to 5,000 by the end of FY25.

Plans are also underway to further expand production capacity to 10,000 by FY26, emphasising a focus on enhancing technology capabilities to drive future growth.

At present, the stock trades at a PE of 185.7x, a premium to its 5-year median PE of 147.6x.

Conclusion

While the electric bus sector in India holds immense promise supported by government initiatives and environmental advantages, navigating its complexities requires careful consideration of both opportunities and challenges.

High initial costs, inadequate EV charging infrastructure, and range anxiety, pose significant hurdles, alongside the need for specialised skills in maintenance and repairs.

Investors should weigh these factors judiciously to make informed decisions in this evolving market landscape.

Happy investing!

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...