CLSA believes Ather Energy’s shares can rally to Rs 1,450 over the next 12 months, implying nearly 60% upside from current levels, driven by what it calls a “twin engine” of cost deflation and premiumisation in India’s electric two-wheeler market.
CLSA has initiated coverage on Ather Energy with an “Outperform” rating and a 12‑month target price of Rs 1,450. The stock was trading 4% higher this morning at Rs 993.
The brokerage values Ather at 40 times its FY32 “normalised” earnings per share and then discounts this back four years using a cost of equity of 13.6%, arguing that the company deserves a mature OEM‑like multiple rather than a start‑up discount.
“We believe Ather can double in three years,” CLSA writes, adding that its blue‑sky valuation goes up to Rs 1,630, while the “rainy‑day” fair value floor is around Rs 800 based on lower multiples and more conservative margin assumptions.
The ‘twin engine’: cost deflation and premiumisation
CLSA’s core thesis is that Ather is riding a structural shift in India’s two‑wheeler market, with electric scooters growing at an estimated 40% compound annual rate between FY26 and FY30 compared with just 4% for internal combustion engine (ICE) two‑wheelers. “We believe this twin engine of cost deflation and premiumisation will drive c.4x volume growth over the next four years,” the brokerage says.
On the cost side, Ather’s new EL platform is described as a “full‑stack re‑engineering” that pivots from costlier aluminium to a steel unibody frame, simplifies the drivetrain, and integrates the motor controller and charger into a single charge drive controller. CLSA estimates this architecture can structurally reduce the bill of materials by about 10–15%, making EL “not a cost‑cutting platform but a margin design platform”.
On the premiumisation side, Ather has built its brand around smart, high‑performance scooters with a tightly integrated hardware‑software stack, initially targeting models priced north of Rs 150,000 before moving into the Rs 100,000–120,000 band with the EL‑based portfolio. “Our read: Ather is not ‘going mass’, it is premiumising the mass,” CLSA says, arguing that this allows the company to expand its addressable market without diluting brand equity or getting dragged into a margin‑destructive price war.
Software moat and recurring revenues
Beyond hardware, CLSA highlights Ather’s proprietary AtherStack software as a key profitability lever, noting that paid software packages have an attach rate of around 90%. Non‑vehicle revenue — including software, charging, service and spares — already accounts for roughly 13–14% of sales and carries “meaningfully higher gross margins versus vehicle sales”, the report says.
“With a c.90% adoption rate, Ather Stack is a product, not an add‑on,” CLSA notes, adding that this software flywheel lifts average selling prices, boosts margins and deepens customer stickiness through features like OTA updates, connected dashboards and proprietary ride‑assist functions. The brokerage argues this integrated hardware‑software ecosystem differentiates Ather from rivals that rely on outsourced or modular software, and provides an incremental monetisation layer that traditional OEMs lack.
Profitability trajectory and risks
Although Ather is currently loss‑making with an Ebitda margin of around minus 6%, CLSA argues that unit economics are already converging with ICE peers at the gross profit per vehicle level, and that the remaining gap is mainly a function of scale and fixed costs. The brokerage expects an Ebitda breakeven by FY28 and margins to improve to about 14–14.5% by FY31–32, in line with leading two‑wheeler OEMs, as EL‑driven cost savings, non‑vehicle revenue and operating leverage kick in.
Key risks, however, include slower‑than‑expected electric two‑wheeler adoption — CLSA is building in a rise in e‑scooter penetration to about 20–21% by FY30 from around 7% currently — as well as heightened competition from both legacy manufacturers and new entrants. Policy support is also evolving, with central subsidies stepping down under schemes such as PM E‑Drive even as some states, like Delhi, move towards longer‑term restrictions on new ICE registrations to structurally favour electric models.
Why CLSA thinks Ather deserves a premium multiple
CLSA draws a parallel between Ather’s current phase and the period when TVS Motor saw its own re‑rating to around 40 times forward earnings, driven by premiumisation, margin expansion and sustained outperformance versus the industry. “In this context, we believe a 40x PE multiple is not only justified but also consistent with historical sector benchmarks for companies undergoing structural transformation,” the brokerage writes.
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“As a pure‑play EV company operating in a segment seeing a c.40% Cagr… Ather’s positioning as a premium, software‑enabled EV platform warrants valuation parity, if not a premium, to legacy peers like TVS at similar stages of their growth cycle,” it adds. This combination of twin engines — structurally lower costs via the EL platform and a premium, software‑led franchise — underpins CLSA’s call that Ather’s stock can rally towards Rs 1,450 over the coming year.
( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
