Top 6 EV Stocks to Watch Out in Nifty's Runup to 40,000

Indian benchmark Nifty 50 is confidently steering towards the 40,000 milestone. Largely driven by India's thriving economy and a surge in foreign investment, it is well-poised to fire on all fours.

This journey to 40,000 could unfold at a pace that can surprise many. And what better way to ride this wave than by latching onto one of the most desirable sectors: electric vehicles (EVs).

The EV market in India is still in its nascent stages but is growing rapidly. The demand for EVs in India is skyrocketing, with sales doubling since 2020. And now the government estimates that the market will reach 10 million (m) units by 2030, implying a 7-year CAGR of 40%.

This surge is led by a myriad of factors. These include the rise in fuel prices, government incentives and a growing realization of the environmental advantages of EVs.

Therefore, investors looking to partake in Nifty 50's journey to 40,000, must also keep a close watch on this burgeoning EV sector.

And the top companies that are making a change to bring about a revolution in India.

Let's take a look at them in detail...

#1 Mahindra & Mahindra (M&M)

At the top of our list, we have Mahindra & Mahindra (M&M).

M&M is the world's largest manufacturer of tractors and enjoys a strong presence in the utility and low commercial vehicle segment in the country. It is a dominant player in the Indian tractor segment, capturing a 41% market share.

Over the past few years, the company's EV business has been making strides.

M&M's EV business is divided into two entities. Mahindra Electric Automobile designs and manufactures compact electric vehicles. Last Mile Mobility is responsible for the company's range of electric, petrol, CNG, and diesel last-mile mobility vehicles, including 3- and 4-wheelers.

Mahindra Electric Automobile, in July 2023, signed a binding agreement with Temasek, a Singapore-based private equity firm, for up to a 2.97% stake in its passenger electric vehicle business. The investment of Rs 12 billion (bn) (US$145 m) values the company's EV business at US$9.8 bn.

Apart from this, British International Investment (BII) is also an investor in Mahindra Electric Automobile.

Last Mile Mobility is valued at Rs 60 bn. This is based on the investment made by the International Finance Corporation (IFC) to further electrify the last-mile segment by scaling up electric three-wheelers and small commercial vehicles (SCVs) that are more affordable.

Both entities have been doing well. Last Mile Mobility has a dominant market share of around 65%, and its 3-wheeler EVs have hit record sales in 2023.

The passenger electric vehicle arm has a robust pipeline of five new production-ready e-SUVs.

M&M plans to invest over Rs 100 bn over the next 7-8 years through its subsidiaries. These investments will be used to set up manufacturing facilities, develop new products, and innovate.

The business has done well over the last few years on the back of strong product launches and expansion into EVs.

M&M is present across a wide array of sectors, apart from automobiles. The company caters to IT, finance, hospitality, real estate etc, running businesses in eleven different sectors via various listed and unlisted entities.

However, the automotive and the farm equipment segment are the largest, accounting for more than 70% of the total revenues in fiscal 2023.

Between 2019-2023, the company's revenue has grown at a 5-Yr CAGR of 6.3% and the net profit has delivered a 7.4% growth. The higher net profit is a direct result of the expanding operating margins, which are up from 15.5% in fiscal 2019 to 17% in fiscal 2023.

The margins have grown sharply owing to the increased volumes and higher realisation which have helped the company benefit from operating leverage.

M&M Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	14.11%	-27.78%	-1.35%	21.00%	34.28%
Operating Profit Margin (%)	15.56%	18.00%	19.12%	16.73%	17.01%
Net Profit Margin (%)	5.75%	3.43%	4.81%	7.77%	9.00%
Return on Capital Employed(%)	13.65%	9.18%	9.46%	11.92%	14.90%
Return on Equity(%)	15.77%	6.83%	9.14%	16.44%	22.09%

Data Source: Equitymaster

The stock is available at a PE of 18.3x, a discount of 7% to its 5-Yr median PE of 19.7x.

To know more about the company, check out its financial factsheet and latest financial results.

#2 L&T Technology Services (LTTS)

Next on our list is L&T Technology Services.

L&T Technology Services (LTTS) is a mid-sized niche Indian IT firm focussed towards exclusive outsourced engineering and R&D Services. While not a past of Nifty 50 as yet, the company is a member of the Nifty 50 midcap group of stocks.

Unlike its larger peers, the company undertakes complex design and engineering projects that require deep domain expertise. It operates up the value chain, enabling the company to attain higher margins on its services.

The company has been building its presence in the EV segment for a couple of years now. Offering end-to-end e-mobility solutions, it excels in electric powertrains, design and development of high-voltage battery management systems and applications for power electronics.

Earlier in this year (2023), the company bagged a deal worth US$45 m from a US-based tier-1 automotive company to be its strategic engineering partner and provide engineering services for its electric vehicle product portfolio. Apart from this, it also scored three deals worth a total contract value of over US$10 m.

LTTS's largest segment, which also houses the EV business, is transportation. It accounts for more than 38% of revenues, whereas industrial products account for 19% of revenues, telecom & hi-tech 19% and process industries 24%.

The company enjoys a well-balanced and diversified presence across industries. It also has a strong reputation due to its heavy engineering-focused parent Larsen & Toubro Ltd.

Around 63% of the business comes from North America, 16% from Europe, 13% from India and the remaining 8% from the rest of the world.

LTTS Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	0.34%	0.10%	-0.03%	0.20%	0.22%
Operating Profit Margin (%)	22.40%	23.48%	21.31%	23.86%	23.94%
Net Profit Margin (%)	15.13%	14.64%	12.23%	14.62%	14.65%
Return on Capital Employed(%)	45.36%	42.51%	30.06%	35.44%	37.03%
Return on Equity(%)	35.51%	31.77%	21.58%	25.32%	26.09%

Data Source: Equitymaster

Between 2019-2023, the company's revenue has grown at a 5-Yr CAGR of 15.8% and the net profit has grown at 18.3%.

The margins have been robust, allowing returns to expand. The 5-Yr average RoCE and RoE stand at 38.5% and 28%, respectively.

To know more about the company, check out the it's financial factsheet and the latest quarterly results.

#3 Tata Motors

Third on our list is Tata Motors.

Tata Motors is a leading Indian automaker with a strong presence (45% market share) in the commercial vehicle (CV) and passenger vehicle (PV) (18% market share) segments.

The company has been a pioneer in the electric vehicle (EV) market in India. Its domestic EV brands have become a common sight on Indian roads such as Tata Punch, Nexon, Tiago and Tigor.

Given the immense popularity of its brands, Tata Motors plans to grow its EV business aggressively. It plans to drive up EV penetration to double digits by launching ten new EVs by 2026.

The company has also unveiled TATA.ev, its new brand identity for the EV market.

The company seems well-placed to capitalise on the growing consumer preference for electric vehicles in India, leading the market with a share of more than 80%.

In addition to the Indian market, Tata Motors also caters to the global luxury auto space with its Jaguar Land Rover (JLR) brand.

The international arm is also extremely positive on the growth from the booming EV market. It expects EVs to contribute around 20% of the total volume by financial year 2026.

Given the robust size of the opportunity, JLR plans to launch the first EV Range Rover in 2024 followed by a Jaguar pure-electric vehicle in 2025.

Tata Motors Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	2.74%	-13.55%	-3.47%	10.69%	23.98%
Operating Profit Margin (%)	9.15%	8.03%	13.98%	9.97%	10.57%
Net Profit Margin (%)	-9.58%	-4.20%	-5.21%	-4.03%	0.68%
Return on Capital Employed(%)	-14.61%	-1.92%	-1.27%	1.23%	7.48%
Return on Equity(%)	-37.19%	-17.94%	-22.17%	-22.53%	5.24%

Data Source: Equitymaster

The business has done well, turning around completely in the past two years. The sales have been inching up between 2019-2023, growing at a 5-Yr CAGR of 3.4%.

However, this expansion in sales comes from substantial growth in the company's borrowings. The debt-to-equity is at an alarming 2.8x in fiscal 2023, raising concerns. However, the strong growth prospects and the solid backing of the promoter group, Tata, offer some respite.

The stock trades at a PE of 20.2x, a discount of 44% to its 5-Yr median PE of 38x.

To know more about the company, check out its financial factsheet and latest financial results.

#4 Bajaj Auto

Fourth on our list is Bajaj Auto.

Bajaj Auto is India's third-largest motorcycle manufacturer, with a 12% market share in two-wheelers (19% in motorcycles). The company has a strong presence in the premium motorcycle segment, with a 33% share.

In fiscal 2023, Bajaj Auto formed a 100% subsidiary, Chetak Technology Ltd (CTL) to tap into the thriving electric vehicle market. This subsidiary is to develop new EV technologies and products and will have its own dedicated manufacturing facility.

Their efforts to capitalise on the booming EV industry seems to be working. Bajaj Auto's domestic sales of its electric scooter Chetak (re-introduced in 2021) grew over four times in fiscal 2023, from 8,187 units in fiscal 2022 to 36,260 units. While the company did cut the price of the EV bike, this kind of surge in demand was unprecedented.

On the back of this success, the company plans to extend its distribution network to over 100 cities and invest in expanding its capacity.

It also plans to invest over Rs 7.5 bn for fiscal 2024, a part of which will also be spent on debottlenecking exercises to ramp-up its EV component volumes.

In addition to its strong domestic presence, Bajaj Auto also has a significant international footprint. Bajaj Auto derives 55% of its volumes and 40% of its value from exports.

The company is the largest exporter of three-wheelers and motorcycles in India, and it serves over 79 countries in Africa, Latin America, South Asia, and the Middle East.

Bajaj Auto Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	23.17%	6.22%	2.95%	33.01%	40.92%
Operating Profit Margin (%)	10.99%	12.45%	8.82%	12.41%	12.78%
Net Profit Margin (%)	7.02%	7.09%	4.50%	7.63%	8.07%
Return on Capital Employed(%)	26.36%	26.00%	14.66%	23.04%	27.47%
Return on Equity(%)	24.90%	23.45%	13.76%	26.18%	30.97%

Data Source: Equitymaster

The revenue and net profit have grown at a 5-year CAGR of 7.4% and 7.5% between 2019-2023, respectively. This robust growth has led to a strong RoCE and RoE averaging 27.9% and 21.5% over the last 5 years.

The stock is available at a PE of 20.2x a 7.4% premium to its 5-Yr median PE of 18.8x.

To know more about the company, check out its financial factsheet and the latest quarterly results.

#5 Hero Moto

Fifth on our list is Hero Moto.

Hero MotoCorp is a leading motorcycle player in India with a 34% share in the two-wheeler market. The company has a strong presence in the affordable and executive motorcycle segments, and it also holds the fourth spot in the scooter segment.

It enjoys an extensive distribution network with over 9,000 touch-points.

The company is making significant strides in the electric vehicle (EV) sector, leveraging its extensive distribution network, It has launched its electric scooter range, VIDA, in October 2022 and plans to extend it to 100 cities this year after initiating eight new cities.

Hero MotoCorp's consistent expansion along with its collaborations highlight its commitment to the growing electric vehicle market.

Earlier this year, the company collaborated with Zero Motorcycles, an American manufacturer of electric motorcycles. While Zero's strength will be its electric powertrain tech, Hero will bring manufacturing and scale to the table.

Going forward, the motorcycle major plans to invest significantly in the premium and electric vehicle (EV) segments. It is aiming for multiple launched in the financial year 2024, targeting one product each quarter.

In fiscal 2024, Hero MotoCorp plans to launch the highest number of premium bikes in its history and aims to scale up its exports. This move aims to cater to the growing demand for premium motorcycles in the Indian market and internationally.

Additonally, most of the company's budget this year, around Rs 15 bn, is towards developing these high-quality bikes and EVs.

Hero Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	5.08%	-13.48%	5.11%	-4.48%	15.35%
Operating Profit Margin (%)	16.42%	16.13%	14.50%	12.96%	13.04%
Net Profit Margin (%)	10.20%	12.81%	9.34%	7.74%	8.04%
Return on Capital Employed(%)	40.12%	33.21%	25.65%	19.47%	23.93%
Return on Equity(%)	27.65%	26.61%	19.71%	14.92%	17.26%

Data Source: Equitymaster

Between 2019-2023, the revenue and net profit have grown at a 5-year CAGR of 14.7% and 11.2%, respectively. This robust growth has led to a strong RoCE and RoE averaging 28.6% and 23.1% over the last 5 years.

The stock is trading at a PE 19.3x, a premium of 4% to its 5-Yr median PE of 18.5x.

To know more about the company, check out its financial factsheet and the latest quarterly results.

#6 Tata Power

Last on our list is Tata Power.

Tata Power is one of India's largest private-sector utilities. It has an installed generation capacity of 14.1GW, of which 8.8GW comes from thermal.

The company and its subsidiary, North Delhi Power Limited distribute power in Mumbai and Delhi - India's two largest cities. It also supplies electricity to large distributors such as BEST and Reliance Infrastructure and to other large industrial users. Along with this, it also runs captive power plants for Tata Steel.

India's largest integrated power company caters to the EV space via its expansive EV charging network.

The company has an extensive EV charging network, which is present across all segments of the EV market, including public charging, captive charging, home charging and workplace charging.

Tata Power is also working to extend its offerings by deploying all types of chargers, including slow, fast and ultra-fast chargers.

The company has also partnered with EV makers like MG Motor India, Jaguar Land Rover (JLR) India, and Tata Motors to provide charging infrastructure for their vehicles.

Apart from this, it has partnered with Tata Power to set up over 300 fast-charging stations in diverse cities across Delhi, Mumbai, Bangalore, Pune, and Hyderabad. All of which offer a strong visibility of growth in the future.

According to a report, the business of EV charging stations can grow at a CAGR of approximately 30% between 2023 and 2027. Tata Power is well-positioned to capitalize on this growth, given its strong presence in the EV market and its extensive charging network.

The business has been growing well. However, being a power utility, the company's returns have been capped by the government. It earns regulated returns on most of its power assets.

The tariffs are determined by the state electricity regulators, or by long-term power-purchase agreements. The Electricity Act (2003) allows for competition in the power business, meaning a utility offering lower tariffs could enter Tata Power's license area.

Tata Power Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	11.09%	-1.91%	11.51%	32.10%	29.23%
Operating Profit Margin (%)	23.87%	29.19%	22.76%	19.70%	16.59%
Net Profit Margin (%)	9.14%	5.93%	4.54%	6.13%	6.91%
Return on Capital Employed(%)	12.12%	10.21%	8.99%	10.13%	13.30%
Return on Equity(%)	17.23%	10.00%	7.64%	12.13%	14.87%

Data Source: Equitymaster

The sales and net profits have grown at a 5-Yr CAGR of 15.5% and 7.3% between 2019-2023. The 5-Yr average RoE and RoCE stand at 10.9% and 12.4%, respectively.

The stock is available at a P/BV of 2.83x a 1.1times premium to its 5-Yr median PE of 1.3x.

To know more about the company, check out its financial factsheet and the latest quarterly results.

Conclusion

These are just a few Nifty 50 companies and two other contenders that are investing big time in the EV space. The EV revolution is gaining momentum in India, and these companies are well-positioned to capitalize on this growth.

By 2030, India should accelerate the adoption of EVs across vehicle categories. The number should rise from 6% of the on-road vehicle population, at present, to 33% in 2040. All of which will directly expand the demand for EV and the industries that support it.

But despite the positive odds, investors must conduct their own research before investing in any stock. And ensure it matches their long-term goals and investment temperament. That is what comprises successful 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...