Shares of a strategic Defense and Aerospace Electronics Systems provider surged nearly 7.6 percent on BSE to Rs. 2,350 in the trading session of Tuesday.
With a market cap of Rs. 12,640.6 crores, the shares of Data Patterns (India) Limited closed in the green at Rs. 2,261.65, up by nearly 3.6 percent, as compared to its previous closing price of Rs. 2,183.05.
Management Outlook based on Trade Brains’ Analysts Q&A
During the recent conference call of Data Patterns held on 11th November, analysts from Trade Brains asked a few insightful questions to the management. Here are the details:
(i) How many contracts are you expecting to get from the IP business by FY26, and how many patents do you hold and any pending patents in the pipeline?
The company is responsible for the development of all contracts it secures, ensuring that intellectual property (IP) related to the products belongs fully to the company. All products are designed internally, and the company is not acting as a system integrator; rather, all product development and design are handled in-house.
In some cases, particularly with government contracts, the company develops the products as part of the contracting process, but the IP is transferred to the government.
Despite this transfer, the IP remains the company’s asset and is utilised to build products. The company focuses on product development and differentiation, while the government typically manages program-specific needs. This approach allows the company to continue growing its business through its product innovations.
(ii) Out of Rs. 971 crore order book, how much % of order book we received from Israel, East Asia and the European Union?
According to management, the company does not receive any orders from Israel, but instead secured orders from East Asia and Europe. The company currently has an order book exceeding Rs. 100 crores from East Asia, including the European Union.
(iii) Any planning for partnerships and joint ventures with major Global Defense Companies for technology development?
The company is already receiving orders from several clients, including three or four companies that are processing and ordering building products. These clients are gradually increasing their order sizes and having more products developed by the company.
Currently, the company’s focus is primarily on domestic programs, but there are plans to expand its efforts internationally. This includes building a marketing arm dedicated to addressing global markets, which would help secure smaller orders in the short term and, in the long run, build a much larger business over the next five years.
While some contracts have been secured, the company acknowledges that it has not yet implemented a sustained marketing effort, which is essential for further expansion.
Management Guidance:
Data Patterns expects revenue growth of 20-25 percent over the next two to three years. The management highlighted that the company was able to maintain the revenues despite delayed deliveries and lower-than-expected order inflow in the first half of FY25.
Looking forward, the company remains focused on maintaining EBITDA margins in the range of 35-40 percent for the full fiscal year, with expectations for Return on Equity (RoE) and Return on Capital Employed (RoCE) to exceed 20 percent.
Data Patterns is working in collaboration with foreign OEMs to explore export opportunities, working towards building Full Systems, maintaining net debt-free status, working towards building full systems, and maintaining a net debt-free position.
Additionally, the company is prioritising efficient execution to enhance operating leverage and continuing product development to address a larger total addressable market (TAM).
With a strong order book in place, the company has secured an order pipeline worth Rs. 2,000-3,000 crores for the next 18 months.
Financials:
For Q2 FY25, Data Patterns reported revenue from operations of Rs. 91 crores, reflecting a decline of around 12.5 percent QoQ from Rs. 104 crores in Q1 FY25, as well as about 16 percent YoY decrease from Rs. 108 crores in Q2 FY24.
Revenue for the quarter was impacted due to the deferment of the delivery schedule by the customer of completed products worth Rs. 27.5 crores.
The company’s net profit for Q2 FY25 stood at Rs. 30 crores, representing a marginal decline of around 9 percent QoQ from Rs. 33 crores in Q1 FY25, and a year-on-year fall of nearly 12 percent from Rs. 34 crores in Q2 FY24.
Operating EBITDA for Q2 FY25 stood at Rs. 34.3 crores, reflecting a 16 percent YoY decrease from Rs. 40.8 crores in Q2 FY24, while the EBITDA margins improved marginally, rising from 37.63 percent in Q2 FY24 to 37.68 percent in Q2 FY25.
Order Book for Q2 FY25:
As of Q2 FY25, the order book of the company stood at Rs. 971.4 crores.
The company’s orders on hand reached Rs. 1,053.22 crores, while the negotiations completed & yet to receive orders stood at Rs. 141.4 crores. Further, including orders negotiated converted into orders, the order book will be Rs. 1,194.62 crores.
Comparatively, the order book as of 1st April stood at Rs. 1,083.07 crores.
The order inflow of Data Patterns has been slower than anticipated in the first half which the company expects to pick up during the second half.
Stock Performance:
The stock has delivered positive returns of nearly 21 percent in one year, while around 18.3 percent of negative returns in the last six months. So far in 2024, the shares of Data Patterns have given positive returns of about 23 percent.
About the Company:
Incorporated in 1998, Data Patterns (India) Limited, one of the fastest-growing companies in the Defence and Aerospace Electronics sector in India, is principally engaged in the business of manufacturing electronic boards and systems and related services.
The company has a robust domain capability in Radars, Electronic Warfares, Communication systems, Avionics & Satellite Systems. It further possesses deep technical expertise in areas such as electronic systems design, embedded software development, and manufacturing.
Written by Shivani Singh
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