Motilal Oswal Initiates Coverage On These Three IT Stocks With Buy And Sell Rating

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Motilal Oswal Report

KPIT Technologies: A software powerhouse

KPIT Technologies Ltd. is a pure-play automotive engineering research and development partner focused on enabling SDV adoption for major OEMs. The company’s core strengths lie in embedded software development, E/E (Electrical/Electronic) architecture, and middleware consulting, accounting for over 80% of its revenue.

With strategic relationships across over 25 OEMs and tier-1 suppliers, KPIT is well-positioned to capitalize on rising software complexity in vehicles. The company’s revenue grew from $304 million in FY20 to $691 million in FY25 (~18% CAGR) and is projected to reach $1 billion by FY28E, clocking ~15% CAGR over FY25-28E. Ebit margins are expected to expand from 17.1% in FY25 to 19.0% in FY28E, supported by scale benefits and acquisitions like Caresoft, which is expected to contribute ~5% to revenue.

We initiate coverage with a Buy rating and a target price of Rs 1,600, valuing KPIT at 40x FY27E EPS – implying a PEG of ~2x on a ~19% EPS CAGR over FY25–28E – reflecting its strong positioning in SDV programs, expanding architecture and middleware capabilities.

Tata Technologies: An engineering specialist facing headwinds

Tata Technologies Ltd. is a global ER&D player with capabilities across mechanical design, digital engineering, and turnkey vehicle development. The company is also expanding its presence in transportation, construction, heavy machinery and aerospace. However, Tata Technologies’ relatively higher share of mechanical engineering and on-site delivery results in lower margins compared to peers focused on high-value software services.

Nonetheless, its joint venture with BMW is scaling well, reflecting the company’s intent to deepen expertise in next-gen automotive software and SDVs, which could gradually enhance its margin profile and revenue mix.

We initiate coverage with a 'Sell' rating with a target price of Rs 580, valuing Tatat Technologies at 28x FY27E EPS – a 30% discount to KPIT’s 40x (~2x PEG) – citing Tata Technologies’ lower margin profile due to high mechanical exposure, client concentration risks, and modest growth visibility despite its end-to-end engineering capabilities.

Tata Elxsi: A design-led leader with near-term speed bumps

Tata Elxsi Ltd. offers solutions across automotive, media and communications, and healthcare. The company’s automotive vertical, which contributes over half of its revenue, is anchored in high-value segments like ADAS (Advanced driver assistance systems), digital cockpit, and connectivity, supported by proprietary platforms. Tatat Elxsi's high offshore mix supports better profitability but margins have come under pressure in recent quarters due to muted revenue growth, elevated GTM spends, and pricing resets in large renewals.

While a sharp decline appears unlikely from here on, structural headwinds could cap margin recovery well below historical peaks (~27–28%). We expect Ebit margins to recover gradually to ~21.1% in FY26E.

With revenue growth also expected to moderate to ~8% CAGR over FY25–28E (vs ~18% over FY20–24), we initiate coverage with a Sell rating and a target price of Rs 4,600, valuing Tata Elxsi at 32x FY27E EPS – an ~20% discount to KPIT’s 40x (~2x PEG) – reflecting near-term growth headwinds in Europe and Healthcare/Media verticals and a less favorable risk–reward profile given current valuations.

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