This stock has gained 51% in the last five days on investors’ new-found love for electric vehicles

• Shares of Greaves Cotton have been surging continuously since the last five days after its arm Greaves Electric Mobility reported strong sales for December 2021 quarter.
• Greaves Electric Mobility, electric two and three-wheeler manufacturer, sold over 10,000 units in December.
• Reportedly, the subsidiary forms 24% of Greaves Cotton’s revenue as of September quarter.

Shares of Greaves Cotton have been surging continuously since the last one week after the company subsidiary announced strong sales numbers in December 2021. The stock has gained as much as 19% on January 11 and 51% in the last five days.

Its subsidiary Greaves Electric Mobility, an electric two and three-wheeler manufacturer, sold over 10,000 units in December. Reportedly, the subsidiary forms 24% of Greaves Cotton’s revenue as of September quarter.
Reason behind the huge rally in stocks

One primary reason for the continuous rise in the stock price is investors’ newly-found love for electric vehicles (EVs).

“Electric vehicles as a subject by itself are attracting a lot of new funds from global investors because there is a significant amount of appetite for that. Market may be more euphoric about the EV, which has led to the price rise, and the company may or may not succeed in the segment. But right now at least the journey is sounding fundamentally good,” Deven R Choksey, managing director at KR Choksey Investment Managers told Business Insider.

Investors’ liking for the company is beyond profits as the investor interest continued despite the company booking losses in FY21.

“Earnings (levels of profits) for even a company like Tesla never came through for 12-15 years, so I don’t think investors are right nor arguing for earnings. Earnings will only come when the company achieves a scale and once they achieve a scale, earnings are bound to be there,” added Choksey.

Besides, the core business of Greaves Cotton that is to manufacture engines and heavy equipment is also well positioned to do well.

“Greaves Cotton’s core engine business, which is a capital goods business, is well positioned and in an upward cycle. Besides, there is a tremendous buying interest for green renewable energy and electric vehicles especially with respect to two wheelers, which is leading to a rally in the stock,” said Kranthi Bathini, director of equity strategy at WealthMills Securities, told Business Insider.

The company’s operations were severely hit in FY21 due to lockdowns led by the pandemic.

Demand for electric vehicles is only going up

With changing environmental conditions and the Indian government's push toward electric vehicles, the demand for EV has remained robust.

“Electric scooters have seen a dramatic increase in demand due to their broader demographic appeal and ease of handling. With changing consumer behaviour, enhanced environmental consciousness, rising petrol prices, rapid urbanisation and significant COVID protocols; we are seeing more people switching to sustainable personal mobility options,” said the company in a press release.

Expansion of subsidiary Greaves electric mobility

The company has acquired 100% stake in electric 3-wheeler company ELE (e-rickshaws).

It also acquired a 26% stake in another electric 3-wheeler company MLR Auto (Teja brand).

Along with it, the company also recently launched a new EV factory in Tamil Nadu’s Ranipet district, which is said to be one of the biggest EV factories in the country.

SEE ALSO: Due date for filing income tax returns extended to March 15, 2022 for individuals whose accounts are to be audited
The rise of electric vehicles makes aluminium more attractive than steel