JP Morgan bullish on ER&D firms; sees 31% upside on Cyient, 23% downside on Tata Tech

The brokerage says Tata Technologies has a high client concentration and faces challenges in scaling non-anchor clients

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Brokerage JP Morgan is bullish on engineering, research and development (ER&D) companies on their relatively resilient growth.

ER&D companies have seen strong growth compared to IT companies, leading CY24 to be a year of recovery, the global brokerage firm said. The total addressable market remains large and attractive, poised to support momentum.

The firm initiated coverage on Cyient, with an “overweight” call and a target price of Rs 2,600, implying an upside of around 31 percent from the closing price of March 19. JP Morgan said that Cyient is seeing strong demand in the majority of its portfolio.

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It also initiated coverage on Tata Tech but with an “underweight” call, with a price target of Rs 800, implying a downside of 23 percent.

Tata Technologies has a high client concentration and faces challenges in scaling non-anchor clients, it said.

For JP Morgan, the order of preference in ER&D companies is Cyient, LTTS, Persistent, KPIT Tech, Tata Elxsi followed By Tata Technologies.

Intraday, Cyient shares jumped almost 4 percent to Rs 2,053.65. Tata Technologies dropped to a low of Rs 1,031.5 on the NSE, down around a percent from the previous close.

Tata Technologies registered a 14.7 percent on-year growth in consolidated profit at Rs 170.22 crore for the quarter ended December 2023.

Cyient reported a 17.4 percent sequential decline in consolidated profit at Rs 147.2 crore for the third quarter of FY24, impacted by tepid topline growth and a higher exceptional loss.

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