JP Morgan, a leading brokerage firm, expresses bullish sentiment towards engineering, research, and development (ER&D) companies, citing their resilience amid market challenges. In contrast to IT companies, ER&D firms have exhibited robust growth, positioning CY24 as a year of recovery, according to the brokerage’s analysis. With a substantial and enticing total addressable market, these companies are expected to sustain their positive momentum. In its latest move, JP Morgan has initiated coverage on Cyient, endorsing an “overweight” rating and setting a target price of Rs 2,600. This forecast suggests a notable upside of approximately 31% from the closing price recorded on March 19. JP Morgan underscores Cyient’s strong demand across a majority of its portfolio, indicating favorable prospects for the company’s growth trajectory.
Additionally, JP Morgan has commenced coverage on Tata Tech, albeit with a less optimistic outlook, assigning it an “underweight” rating. The brokerage firm has set a price target of Rs 800 for Tata Tech, indicating a potential downside of 23% from its current valuation.
JP Morgan’s assessment highlights Tata Technologies’ struggle with a notable client concentration and the ongoing challenge of broadening its client base beyond key accounts. This factor has been a crucial consideration in JP Morgan’s decision to rate Tata Technologies with an “underweight” call and set a price target of Rs 800, implying a potential downside of 23% from current levels.
In the realm of Engineering, Research, and Development (ER&D) firms, JP Morgan’s preference ranking places Cyient at the forefront, followed by LTTS, Persistent, KPIT Tech, Tata Elxsi, and subsequently, Tata Technologies. This ranking is indicative of JP Morgan’s confidence in Cyient’s growth trajectory amidst favorable market conditions.
Market movements corroborate JP Morgan’s stance, with Cyient shares marking a significant intraday uptick of nearly 4%, reaching Rs 2,053.65. Conversely, Tata Technologies experienced a downturn, dropping to Rs 1,031.5 on the NSE, reflecting a marginal decline from the previous close.
Despite the challenges, Tata Technologies showcased resilience, reporting a noteworthy 14.7% year-on-year growth in consolidated profit, amounting to Rs 170.22 crore for the quarter ending December 2023.
In contrast, Cyient’s performance witnessed a sequential decline in consolidated profit during the third quarter of FY24, with profits dipping by 17.4% to Rs 147.2 crore. This decline was attributed to subdued revenue growth and higher exceptional losses, underscoring the dynamic nature of the ER&D sector.
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