KPIT Tech shares rise 3% as Motilal Oswal initiates with 'Buy' rating

KPIT Tech shares rose 3 per cent after Motilal Oswal assigned a 'Buy' rating while initiating coverage on the ER&D space

Shares of KPIT Technologies rose over 3 per cent on Monday after domestic brokerage firm Motilal Oswal assigned a 'Buy' rating while initiating coverage on the Engineering Research & Development (ER&D) space. 

 

Motilal Oswal has a target price of ₹1,600 per share on KPIT Tech, while assigning a 'Sell' rating on Tata Technologies (target price: ₹580) and Tata Elxsi (target price: ₹4,600). 

 

KPIT Tech is a pure-play automotive ER&D partner, focused on enabling software-defined vehicle (SDV) adoption for leading original equipment manufacturers (OEMs), the brokerage said in a note. Its core strengths in embedded software development, electrical/electronic (E/E) architecture, and middleware consulting contribute over 80 per cent of revenue, it said. 

 

With strategic partnerships across more than 25 OEMs and tier-1 suppliers, the company is well-positioned to benefit from the increasing software complexity in vehicles. Ebit margins are projected to rise from 17.1 per cent in FY25 to 19.0 per cent by FY28, supported by scale benefits and contributions from acquisitions such as Caresoft, which is expected to add around 5 per cent to revenue.

 

The 'Buy' rating on the stock reflects its strong positioning in SDV programs, expanding architecture and middleware capabilities, Motilal Oswal said.  

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KPIT Tech share price history

The company's stock rose as much as 3.2 per cent during the day to ₹1,234 per share, the biggest intraday rise since June 30 this year. The stock pared gains to trade 2.8 per cent higher at ₹1,230 apiece, compared to a 0.24 per cent advance in Nifty 50 as of 10:35 AM. 

 

Shares of the company snapped a two-day losing streak and currently trade at 4.4 times the average 30-day trading volume, according to Bloomberg. The counter has risen 16 per cent this year, compared to a 5.5 per cent advance in the benchmark Nifty 50. KPIT Tech has a total market capitalisation of ₹33,716.95 crore. 

 

Why Motilal Oswal is bullish on the ER&D space?

Global mobility is being reshaped by three forces: rising CASE (connected, autonomous, shared, electric) adoption boosting software’s role, OEMs shifting to centralised architectures enabling SDVs, and regulations driving investment in electric and sustainable technologies, according to the brokerage. 

 

For the top three automotive players in the ER&D industry, average organic annual constant currency revenue growth has slowed from 17 per cent over FY21-FY23 to 12 per cent over FY24-25. Asian OEMs are pivoting toward hybrids and localised strategies, while global players are recognising software as the key competitive frontier, Motilal Oswal said. 

 

This backdrop offers tailwinds for specialised engineering service players with domain depth, codevelopment capabilities, and global delivery footprints, it said. 

 

Motilal Oswal initiated coverage on Tata Tech with a 'Sell' rating. The stock is valued at a discount to KPIT Tech given the lower margin profile from high mechanical exposure, client concentration risks, and modest growth visibility despite its end-to-end engineering capabilities.

 

Meanwhile, a 'Sell' rating was assigned to Tata Elxsi as reflecting near-term growth headwinds in Europe and healthcare/media verticals and a less favourable risk–reward profile given current valuations.