KPIT Tech remains JPMorgan's biggest "overweight"; Here's why

KPIT Technologies continues to be JPMorgan's biggest 'Overweight' bet in the auto engineering and R&D space, even as the global brokerage upgraded its stance on Tata Technologies and Tata Elxsi.

In its latest note, JPMorgan reiterated an 'Overweight' rating on KPIT Tech with a price target of ₹1,400, citing improving demand conditions in auto ER&D over the past three months.

The brokerage said easing trade-related concerns and lower tariff uncertainty have encouraged global OEMs to restart R&D programmes that were earlier put on hold, although the recovery is expected to be gradual.

JPMorgan highlighted that ER&D stocks have underperformed over the past year, with the Nifty IT index down 14%.

Among auto focused IT players, Tata Technologies has declined 27%, Tata Elxsi is down 19%, and KPIT Tech has fallen 20% over the same period.

Despite this underperformance, the brokerage believes KPIT is best positioned to benefit from a recovery in auto technology spending.

The brokerage pointed out that KPIT has the highest exposure to auto technology spends at nearly 100%, compared with about 82% for Tata Technologies and 55% for Tata Elxsi. This deep exposure makes KPIT the preferred play as investments in the sector pick up.

JPMorgan also said that current investments are being driven more by hybrid vehicle programmes rather than electric vehicles. Europe is leading this recovery, followed by APAC, while the US market is still a couple of quarters away from a meaningful rebound.

KPIT Tech, Tata Technologies and Tata Elxsi have relatively higher exposure to Europe, which positions them better for the near term recovery. In contrast, L&T Technology Services has higher exposure to the US auto market.

Alongside its positive view on KPIT, JPMorgan upgraded Tata Technologies and Tata Elxsi to 'Neutral' from 'Underweight'.

The brokerage raised Tata Technologies' price target to ₹710 from ₹570, and Tata Elxsi's price target to ₹4,800 from ₹4,000 earlier. L&T Technology Services remains rated 'Neutral', with the price target unchanged at ₹4,300.