Brokerage house IIFL believes that India’s Engineering Services (ER&D Services) industry is structurally well positioned to grow rapidly over the long term, driven by accelerated global digital ER&D spend, growing outsourcing penetration, talent availability and value. Inspired by the continuation of the series.
“ER&D services companies have historically traded at a premium compared to IT services, given their specialized offerings and low outsourcing penetration for long-term growth,” it said in a note.
The brokerage believes the best way for the industry to play a tailwind is through buy-rated L&T Technology Services (LTTS), which has a target price of Rs. 5,800 per share on commencement of coverage at Rs. IT stockGiven its diversified exposure and marquee client-base and the stock is currently trading at a 40%/15% discount to peers TELX/KPIT, despite having the most diversified vertical exposure.
“We believe that LTTS’s diverse verticals (up to $100 million in annual revenue from each of its five verticals) and client exposures leverage the structural growth story of India’s ER&D market, while also protecting against vertical-specific cyclicality. are,” it said.
It has upgraded Cyient (CYL) to Add to Buy with a price target of 1,280, as it believes it is taking the right steps to revive growth and is currently trading at attractive valuations.
“Following the organizational restructuring exercise in FY2011, we believe CYL is taking right steps towards reviving consistent and profitable growth by focusing on five key pillars, mega deals and mining of existing customers . IIFL added in the note, combined with recovery in its largest vertical (aerospace) and easing of supply constraints in DLM should result in a revenue CAGR of US$ 13% in FY22-25ii.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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