Top 5 fundamentally strong EV stocks to watch for in 2024
While some are yelling about the impending doom of electric vehicle manufacturers, the bulls are convinced that the top EV companies could potentially generate billions in revenue and profits.
Recently, we came acrossa report that says EV penetration in India continues to improve at a healthy pace, spurred by government initiatives and increasing product launches.
The report by rating agency ICRA states that electric bus, two-wheeler, and three-wheeler penetration is set to grow by leaps and bounds by FY25.
There are thousands of investors pouring money into EV stocks right now. They don’t see the parabolic run. They just see the potential that these companies present.
The controversy surrounding the FAME subsidy makes it even more enthralling for the public market investors. The removal of the FAME-II subsidy was a dampener and we can already see the pace of adoption slowing down over the past few months.
Without a subsidy, a buyer will be able to recover the cost of purchase in five years as against three years earlier.
As we’ve said before, EVs have their pros and cons just like any other technology. The proponents choose to see the positive, optimistic perspective. The critics are more focused on the negative, pessimistic perspective.
There are plenty of challenges, from technology to regulation to infrastructure to consumer behaviours, that need to be overcome in order for EVs to continue their ascension globally, but there are many signs of how powerful and positive this technology is for the world.
Here are the top EV stocks to watch for in 2024. These companies present interesting growth opportunities for the near term, especially in the 2-wheeler segment, and could see momentum in the new year.
#1 TVS Motor Company
2-wheeler EVs present the biggest opportunity among all segments. Thus, the company leading the 2-wheeler race stands as the top beneficiary.
TVS Motor Company is known for its scooter and motorcycle offerings including popular ones like TVS Jupiter, TVS Ntorq, TVS Scooty Pep+, Apache Series, TVS Sport, among others.
It currently manufactures at its manufacturing facilities located at Tamil Nadu, Karnataka and Himachal Pradesh. It’s the only listed player in India in the moped segment.
Shares of TVS Motor Company are currently trading near record levels as there’s enough momentum building up. The company continues to give more reasons why the momentum going forward could be stronger than ever.
In the coming quarters of FY24, TVS Motor is expected to see an improvement in market share on the back of premiumisation and as festive season kicks off.
The company has recorded higher growth in the motorcycle and scooter segments as compared to industry peers.
The EV segment could make or break the case for TVS Motor as it has invested heavily in R&D for technology, product development, among other things.
TVS Motor is all set to dispatch a record volume of more than 200,000 scooters, based on its electric vehicle (EV) platform, in the financial year 2024.
The company plans to launch more products in the EV segment by introducing new EVs in the 5-25 kW segment in the next 15 months. It’s also planning to launch an electric three-wheeler in 2024.
The iQube launch would be key as experts suggest this one could contribute significantly to the company’s profitability.
As part of its global expansion plan, the company recently partnered with Emil Frey Group to foray into the European markets.
In October 2023, it became the first Indian company to introduce motorcycles, scooters, and three-wheelers in Venezuela.
As far as financials go, the company reported the highest-ever revenue, EBITDA, and net profit in Q2.
In the past five years, the company has grown its revenue by 50% while profit has almost doubled during the same time.
Going forward, TVS is also expected to reap benefits of the battery manufacturing megatrend as it is exploring how to set-up facilities and other ins-and-outs.
#2 Rajratan Global Wire
In every vehicle, tyre wires are essential for durability, traction, heat dissipation, fuel efficiency, and comfort. And the company leading the tyre-wires race is Rajratan Global Wire.
It’s the largest bead wire manufacturing company in the world and the only manufacturer of bead wires in Thailand.
The company is critical to the smooth functioning of almost 50% vehicles on the road today as it enjoys dominant market share in a niche segment.
It serves customers across India, Thailand, US, South Korea, and Italy. Some of its marquee clients are Apollo Tyres, Bridgestone, Ceat, MRF, Michelin, and Toyo Tyres.
With growing demand, the company is investing heavily to increase its capacity by setting up a new plant in Chennai. This plant is expected to start trials towards the end of the year, so revenue could start kicking in 2024 onwards.
Besides capacity expansion, the company is concentrating on acquiring new clients in India, Europe, Vietnam, Cambodia, and Malaysia.
In the first two quarters of FY24, the company faced margin contraction amid global uncertainties and due to the fact that competition picked up because of Tata Steel’s new capacity.
Despite these challenges, Rajratan is confident of faring well in the remaining two quarters of financial year 2024.
Until 4 to 5 years ago, the company’s business was saddled with high debt. The returns on equity were barely in the green. This underperformance was mainly on account of subsidiary operations.
Its subsidiary in Thailand underwent a long learning curve and struggled to earn profits in the early years of low volumes. Thailand business turned around in FY16, and since then has contributed to profits.
On the back of expansion in capacities, higher acceptance from clients, and economies of scale, the financial performance in the last five years has turned around.
Going forward, revival in the replacement market, capacity expansion plans, and available capacities with the company to fulfil this demand is expected to drive growth.
Another strong contender in the 2 and 3-wheeler EV space is Bajaj Auto.
In financial year 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 financial year 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 is now extending its distribution network to over 100 cities and investing in expanding capacity.
It plans to invest over ₹7.5 bn for financial year 2024, a part of which will also be spent on debottlenecking exercises to ramp-up its EV component volumes.
Bajaj Auto is also expected to benefit from improved sales of premium bikes like Triumph Speed 400 and Scrambler 400X. The company sold more than 8,000 units of Triumph Speed in the second quarter.
As far as financials go, the company’s 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.
Shares of the company are currently trading near record levels.
#4 Fiem Industries
For Fiem Industries, the EV transition is a gamechanger.
You see, the 2-wheelers segment is the most promising segment for EV transition. Fiem Industries derives most of its revenue (over 90%) from this segment.
Ola Electric gets all LED based products and mirror for its electric 2-wheelers from Fiem. Besides Ola, the company is already a supplier to Revolt, Okinawa, Hero Electric, Electrotherm, and Ampere.
Fiem Industries was the first to introduce LED lights in 2-wheelers. Unlike other players that have been sourcing the technology, the company is reliant on in-house R&D.
The company is one of the leading manufacturers of automotive lighting, signalling equipment and rear-view mirrors in India.
While its products could be classified as EV agnostic, the EV transition and incremental demand for auto LEDs has been a big inflection point for the business.
The company is actively working on new products and has added several new customers in the EV segment. These include Raptee, Polaris, and Numerus.
Between 2019-2023, the company’s net sales and profits have grown at a CAGR of 8.4% and 21.6%, respectively.
The 5-year average RoCE and RoE stands at 18.9% and 14.4%, respectively.
The company has always maintained a strong balance sheet with no debt on its books.
Going forward, Fiem seems to be on a promising growth trajectory. With the robust expected expansion in the two-wheeler market and the diversification of its product range, the company is well-positioned to replicate its past track record.
#5 Pricol
Last on the list we have Pricol.
The company is the world’s second largest maker of driver information systems for two wheelers, with more than 50% market share in India.
In the CV segment and offroad vehicle, it is among the fourth largest globally, and has over 70% market share in driver information system in CVs.
How does it stand out in the EV segment compared to peers? Well, Pricol is making strong inroads and getting future ready for the EV segment by collaborations with startups, etc.
Pricol is the sole supplier to TVS iQUBE and we already saw above how the demand for TVS vehicles is on the rise.
To further deepen its presence in the EV space, Pricol has also entered an international licensing agreement with BMS PowerSafe, to manufacture and sell Battery Management System (BMS) for Indian market.
In this partnership, Pricol will be licensing the product and process technology of BMS from the partner and will be manufacturing complete BMS in-house. This will allow Pricol to offer a pure play EV product.
To give more context on how the company is involved in the EV space, the management said in its recent concall that growth was impacted due to lower production of EV vehicles and deferment of schedules due to FAME subsidy issue.
Despite these impressive partnerships and market share, the company is rarely talked about in the mainstream media, for its past financials were shaky with massive debt on its balance sheet and loss-making subsidiaries.
But the recent performance shows it’s on track to maintain a clean balance sheet and healthy return ratios over the next few years.
In 2023 so far, shares of the company have gained over 70% and currently trading near the all-time high levels hit in October 2023.
Pricol Share Price – 5 Years Performance
So there you go… the top 5 EV stocks watchlist for 2024.
Happy Investing!
Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
