HSIE Institutional Report: Ather Energy

Ather Energy Superior Execution Continues to Improve Margins

While the current volume inflection is led by dealership expansion, the next inflection from FY27/FY28 is likely to be driven by portfolio expansion via its upcoming low cost EL platform, which will also add more affordable models to the portfolio, thereby bringing in a new set of customers and expanding the addressable market. Going forward, we expect the cost structure to persistently improve over the medium term, aided by economies of scale, operating leverage, introduction of the low-cost EL platform, improving non-vehicle revenue mix, and continued value engineering efforts. It continues to impress with its capability to scale volumes and increase market share along with margin improvement (that too without PLI). We value the company at 6.0x EV/sales for a TP of INR897; maintain BUY. It continues to be our top pick.

Ather Energy Quarterly Performance

EBITDA margin at -7.6% improved by 1,461bps YoY and 719bps QoQ, a beat to our estimate of -14.0% (we estimated rising battery cell costs to hit gross margins) and Bloomberg consensus estimate of -10.4%. EBITDA margin improvement was driven by operating leverage and increase in non-vehicle revenue contribution. Gross margin came in at 21.9% improving 557bps YoY and 316bps QoQ. The quarter recorded non-vehicle revenue contribution at 14%, which is the highest ever mix.

Business Expansion

The company has expanded its total store count by 76 stores over Q3FY26 to 600 stores. Management expects to continue the pace of store addition to reach 700 stores by the end of Q4FY26, with continued focus on Middle India: Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh and Odisha. As of 31 Dec 2025, charging network reached 5,000 points, which the company is now also able to monetize.

Path to Profitability

Through continued efforts, management has been able to reduce the Bill of Material (BOM) cost from INR 120k in FY25 and to INR 110k as of 9MFY26, with total battery cell cost being below 20% of the BOM cost. This has also been possible due to the transition from NMC to LFP batteries for a large part of the portfolio. The upcoming EL platform is a low cost architecture that also helps de-risk from volatile aluminum prices. It indicated that there is no risk from cannibalization of Rizta, as in case that happens, it would in fact aid profitability. It is also working to improve the mix of non-vehicle revenue, from the current 14%. It believes that there is a large runway considering higher potential of spares and service revenue as the fleet size expands and with higher monetization of the pro-pack, which is a key value proposition as well as a differentiator vis-à-vis peers.

Dodging headwinds

Management, via its value engineering and R&D efforts, has structurally improved the cost structure so that it is better able to absorb the withdrawal of demand incentives and higher RM costs.

Quarterly/Annual Financial Summary

Source: HSIE Research (HSIE Results Daily – 03 Feb 26 – HSIE-202602030656002630379.pdf)

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