Share price of this debt-free defence stock and a key player in the defence and aerospace electronics sectors moved up by nearly 1.8 percent to Rs. 3,136.8 on BSE in the morning trading session of Friday, compared to its previous closing price of Rs. 3,082.3.
With a market capitalisation of Rs. 17,244.7 crores, at 09:46 a.m. the shares of Data Patterns (India) Limited were trading in the green at Rs. 3,094.6, up by 0.4 percent on the BSE.
The company has delivered positive returns of 87.5 percent in the last one year and so far in 2024, it has given positive returns of around 67.4 percent.
In March 2023, Data Patterns successfully raised Rs. 500 crore via qualified institutional placement (QIP) to develop products in radars, EW, communications and satellites. This will help the company to expand its product development for Ministry of Defence (MoD) tenders.
Along with supplying subsystems, the company is expanding its business line to provide whole systems to the MoD.
The order book hit Rs. 1000 crores in Q2 FY23-24, with an order inflow of Rs.145 crores, including export orders of nearly Rs. 39 crores, primarily from Europe, United Kingdom (UK) and South Korea.
The company aims to grow its revenue by 30 percent and a 40 percent margin in the financial year 2024.
The government’s plan to boost the aerospace and defence industries will also benefit the company, resulting in a combined turnover of Rs. 1.75 lakh crore by the year 2025.
Data Patterns’ management is bullish about the future, predicting to secure more orders of Rs. 600 to Rs. 800 crores over the following two quarters.
In addition, the management also anticipates the growing order book to support revenue growth of over 25 percent CAGR for the next two years, given the visibility of a healthy order pipeline. The company also has ambitious plans for future expansion, with a capex of over Rs. 100 crores for FY25.
Earlier this month, Jefferies initiated coverage on Data Patterns with a ‘buy’ rating and a target price of Rs. 3,545, indicating a potential upside of 22 percent from the current price of Rs. 2,904.35.
According to the brokerage firm Jefferies, the defence exports of India reached a record high of Rs. 21,083 crore for FY24 and are expected to climb to around Rs. 583,57 crore (US$7 billion) by FY30.
The brokerage mentioned that the revenue of Data Patterns could grow fivefold between FY24 to FY30, mainly as a result of indigenisation and export pipeline benefits.
Data Patterns supply crucial components for Brahmos missile systems and Sukhoi aircraft, both of which have significant export potential.
The brokerage also projects the company’s exports to rise to 24 percent of sales in the medium term, up from 16 percent in FY23.
Domestic defence spending is expected to double between FY24 and FY30, and the return on equity (ROE) improvement and reducing working capital intensity are the other growth drivers.
The primary concerns of Data Patters as per Jefferies include technological obsolescence and a lack of management bandwidth.
In January, the brokerage firm InCred Equities initiated an ‘add’ rating to Data Patterns as it expects a steady performance from the company with a year-on-year growth rate of more than 43 percent.
The brokerage also highlighted that Data Patterns is a high-growth company with constant margins and growing return ratios, and it anticipates its strong momentum will continue in the medium term.
Data Patterns secured new orders totalling Rs. 130 crore in Q1 FY23-24, and the brokerage anticipates the strong new order momentum to continue, since orders worth more than Rs. 100 crore were in the advanced stages of negotiation. As of the end of the first quarter of FY24, the company’s order book was Rs. 970 crore.
InCred expects the strong performance to continue, and the EBITDA margin of 36 percent to remain consistent year-on-year. It also expects higher other income YoY due to a strong net cash position, which would drive the profit after tax (PAT) growth.
In terms of financials, the company’s revenue from operations grew by nearly 25 percent YoY from Rs. 112 crore in Q3 FY22-23 to Rs. 140 crore in Q3 FY23-24, accompanied by an increase in the net profit of 54.5 percent YoY, from Rs. 33 crore in Q3 FY22-23 to Rs. 51 crore in Q3 FY23-24.
As of March 2024, FIIs hold 14.56 percent of the shares, whereas DIIs hold 11.58 percent of the shares in the company, aggregating to 26.14 percent of the institutional holdings.
With an average ROE of 17.7 percent over the previous five years—surpassing the industry average of 16.17 percent—Data Patterns has shown strong financial growth, indicating effective use of capital and value creation.
Data Patterns (India) Limited, incorporated in 1998 as “Indus Teqsite Private Limited,” is a vertically integrated provider of defence and aerospace electronics solutions to the indigenously developed defence products industry.
The company focuses on in-house development and production facilities and has supplied products for all the platforms, such as space, air, land and sea, including products for LCA-Tejas, Light Utility Helicopter, BrahMos missile.
Written by Shivani Singh
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