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On Tuesday, Bernstein initiated coverage on KPIT Technologies, an Indian automotive engineering and digital services company, with an Outperform rating and set a price target of INR 2,120.00. The firm highlighted KPIT's position as the largest India-based automotive Engineering Research & Development (ER&D) service provider, noting its significant client base and robust intellectual property (IP) portfolio.
The company's deep engagement with automobile original equipment manufacturers (OEMs) and Tier 1 suppliers, which constitute 96% of its revenue, was emphasized as a key strength. KPIT Technologies has reportedly outperformed its ER&D peers due to these strong industry relationships.
Bernstein pointed out that investment intensity from auto OEMs in ER&D has increased from 3.6% to 4.5%, driven by a surge in investments across electric, autonomous, and connected vehicle technologies. This trend is seen as a positive driver for KPIT's business prospects.
The firm also noted KPIT's financial stability, with EBITDA margins holding steady at 20.5%, reflecting the company's ability to command premium pricing and maintain profitability. The price target of INR 2,120.00 is based on a 50x two-year forward Price-to-Earnings (P/E) multiple, suggesting confidence in the company's earnings growth potential.
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