Data Patterns surges 13% on strong Q3 results, healthy order book position

With the expectation of new orders in Q4, the management said the company is focused on improving execution effectiveness to promote operating leverage and maintaining a diversified order book

Shares of Data Patterns (India) surged 13 per cent to Rs 1,317.75 on the BSE in Monday's intra-day trade after the company reported a strong performance in the December quarter, wherein the revenue and profit after tax (PAT) more-than-doubled. As on date, it has healthy orders of Rs 890.40 crore in hand, the company said in an exchange filing.

Revenue from operations for the quarter increased to Rs 111.8 crore, up 160 per cent year-on-year (YoY). The compan's PAT zoomed 272 per cent YoY at Rs 33.32 crore. On account of better execution, gross margins expanded 140 bps QoQ and Ebitda margins for Q2FY23 were at 42.2 per cent as against 34.2 per cent in Q2FY23 and 35.7 per cent in Q3FY22.

With the expectation of new orders in January-March quarter (Q4), the management said the company is focused on improving execution effectiveness to promote operating leverage and maintaining a diversified order book. "With the new manufacturing facility anticipated to commence in Q4FY23, we are well positioned to benefit from the strong sectoral tailwinds given our R&D prowess and our manufacturing capabilities," the management said.

Data Patterns' core competencies include design and development across electronic hardware, software, firmware, mechanical, product prototype besides its testing, validation and verification. Its involvement has been across Radars, Electronic Warfare Suites, Communications, Avionics, Small Satellites, Automated Test Equipment, COTS and programmes catering to Tejas Light Combat Aircraft, Light Utility Helicopter, BrahMos and other Communication & Electronic Intelligence Systems.

The company works closely with the defence PSUs such as Hindustan Aeronautics and Bharat Electronics as well as government organisations involved in defence and space research like DRDO and ISRO.

According to ICICI Securities, Data Patterns is an ancillary in the emerging defence space with a huge runway of growth yet to be captured in the defence electronics field. Defence electronics provides a huge opportunity of around Rs 1.5 trillion in next four to five years led by armed forces’ requirement of advanced systems , Fire control system for BrahMos missile, Avionics for LCA, RWR for fighter aircraft, ELINT for airborne and ground platform and radar subsystems are key orders in for DPIL.

Technical View

Bias: Positive

Target: Rs 1,480

Support: Rs 1,310

Shares of Data Patterns (India) have recouped significant ground since the last week of December 2022. The stock has rallied nearly 36 per cent during this period.

The overall price structure on the weekly chart remains positive with the likelihood of the stock testing Rs 1,480 on the upside. 

Meanwhile, the daily chart suggests that the bias is likely to remain positive as long as the stock sustains above Rs 1,310.

Among key momentum oscillators on the daily chart, the DI (Directional Index), MACD (Moving Average Convergence and Divergence) and the Slow Stochastic have given a positive divergence; hence the up move may likely extend in the near-term.

(With inputs from Rex Cano)