JPMorgan named KPIT Tech as its top pick among Engineering Research and Development (ER&D) firms, with the auto sector expected to drive growth recovery from 2025. Alongside that, JPMorgan was also overweight on Cyient, L&T Technology Services, and Persistent Systems but remained 'Underweight' on Tata Elxsi and Tata Technologies.
As for KPIT Tech, JPMorgan reiterated its 'Overweight' stance, with a target price of Rs 1,900, indicating a 39 percent upside from its last closing price. With its focus on automotive engineering and mobility solutions, KPIT Tech is likely to benefit from the sector's rebound.
"Auto weakness is more cyclical and transient and growth should accelerate from next year," JPMorgan said in a note.
While the brokerage believes that a rebound in the auto sector could widen the valuation premium for ER&D companies over their IT peers, persistent weakness in the telecom segment could cap this premium, making it unlikely to return to past peak levels.
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In addition, JPMorgan's other top picks in the ER&D space included Persistent Systems for its strong growth prospects, while L&T Technology Services and Cyient are identified as key recovery plays. The brokerage's preferred ranking for ER&D stocks places KPIT Tech and Persistent at the forefront, followed by L&T Tech, Cyient, Tata Elxsi, and Tata Tech.
Persistent Systems was assigned a target of Rs 6,100, reflecting a modest 3 percent upside. L&T Tech had a target price of Rs 6,300, offering a 15 percent potential upside, while Cyient's target of Rs 2,250 implies a 21 percent gain.
JPMorgan's target of Rs 6,400 for Tata Elxsi is 7 percent below its last close, while the Rs 800 target for Tata Tech implies a 16 percent downside from the previous session's close.
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