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Target: ₹3,035
CMP: ₹3,189.15
During the quarter Data Patterns (India) Ltd has reported a decent set of performance on the profitability front. Revenue during the quarter grew by 16 per cent y-o-y to ₹104.10 crore (vs est. ₹109.40 crore) backed by execution of own IP orders during the quarter. Gross margin expanded by 1005bps y-o-y/+36bps q-o-q to 72.3 per cent, this was backed by a higher share of its own IP programme.
We like to maintain our positive view on DPIL, due to large localisation opportunities from the defence sector and in-house technology developed in the last 4-5 years making DPIL more competitive over its peers.
Further, DPIL is engagement in high growth category product such as radar, E&W, BrahMos missile participating, avionics etc. in most of the defence modernisation programs, well-positioned to benefit from Make in India Opportunity. Decent size of order book (about 2x of FY24 revenue) will support the growth story of the company.
At the current level stock is trading at premium valuation of 75x/57x of FY25 & FY26 to most of the stock in defence electronics. We maintain a Sell rating on the stock with a TP of ₹3,035, valuing it at 55x of FY26E EPS after factoring all the positives.
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