Data Patterns hits new high; stock rallies 28% over QIP issue price

The strong order backlog at Rs 1,014 crore as of January 2023, and healthy order pipeline provides strong revenue visibility

Shares of Data Patterns India hit a new high of Rs 1,556.45 as they rallied 5 per cent on the BSE in Tuesday's intra-day trade on strong business outlook. The stock of the aerospace & defense company has surpassed its previous high of Rs 1,540, touched on February 6, 2023.

The stock was quoting higher for the seventh straight trading day, and has surged 20 per cent during the period. They uptick comes after the company successfully raised funds via qualified institutional placement (QIP). It was trading 28 per cent higher over its QIP issue price of Rs 1,220.31 per share. Data Patterns had raised Rs 500 crore by issuing 4.1 million shares to eligible qualified institutional buyers.

The company proposed to utilize the net proceeds towards funding working capital requirements of the company, investment in product development by the company; repayment/ prepayment, in full or part, of certain borrowings availed by the company; funding capital expenditure towards setting up an EMI-EMC testing facility and funding acquisition of land (including building).

That apart, the government has signed contracts worth around Rs 44,000 crore in March 2023 with defence PSUs like Bharat Electronics (BEL), Bharat Dynamics (BDL), Cochin Shipyard (CSL), Goa Shipyard (GSL) and Garden Reach Shipbuilders & Engineers (GRSE).

Data Patterns is a vertically integrated defence and aerospace electronics solutions provider, catering to the indigenously developed defence products industry. The company is one of the key beneficiaries in the private defence industry from the recent orders received by BEL.

The strong order backlog at Rs 1,014 crore as of January 2023 end (2.3x TTM revenues), and healthy order pipeline provides strong revenue visibility. The company expects Rs 2,000-3,000 crore worth orders in the pipeline for the next three to four years (which includes radars, avionics, fire control systems for BrahMos Missile, checkout equipment, etc).

Analysts at ICICI Securities estimate revenue, Ebitda, and net profit CAGR of 32.6 per cent, 27.8 per cent, and 30.2 per cent, respectively, over FY22-25E. Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-24E. However, given the rich valuations, the brokerage firm said it retains its 'BUY' rating on the stock with a target price of Rs 1,670 (valuing at 45x on FY25E EPS).