IMO, this is the most important slide as I see Data Patterns to be a long term sectoral play.
Though the valuation is a bit expensive, the growth rate is sustainable with good order book visibility. Furthermore, the export potential is huge going forward. Currently only 10% of revenue is from exports.
Positives to look out for:
More value added products with increased sophistication
Increased client base
Sectoral tailwinds:
Commercialisation effort of Indian defense - govt is quite keen to improve the export fraction
Make in India - Particularly for defense, India wants to be self reliant
Data Patterns diverse product range includes it products supplied for products like LCA-Tejas, Light Utility Helicopter, BrahMos missile.
I understand outlay from budget may be for various major defense products but Data Patterns product range diversification will always find its applications like Radars, Communication Systems, Electronic Warfare and Satellite.
Though the fundamentals look strong and revenue growth prospects are there, the current stock valuations seem to account for a very high growth far into future.
If the PAT becomes 3x over next 5 years, the current valuation is still justifiable.
Few questions in my mind right now:
what is the revenue & PAT projection that is reasonable for Data Patterns? As per reverse DCF, something around 40% growth in PAT is priced in.
will their orderbook growth continue over to next few years?
will they be able to service their orderbook with their capacity additions?
is there more upside from a fundamental POV considering the current rich valuation?
Just putting this out as defence sector has run up a bit and we need to be cautious not to get caught in cycle peak / bubbles.
I have a followup question, as the no. of shares is increasing through IPO/QIP/QIB etc the EPS growth might get impacted ? hypothetical example, if the PAT grows by 10% and same year company increase no. of shares by 10%, the EPS would remain constant inspite of the growth and hence minority shareholder doesnt get the full benefit of the growth?
Data Patterns (India) Limited, a defense and aerospace electronics solutions provider, has reported significant growth in its financial results for Q2 FY 2023-24.
Total income for Q2-FY24 increased by 32% compared to the same period last year.
Revenue from operations in the same quarter increased by 23%.
Operational EBIDTA increased by 35%.
Profit Before Tax (PBT) improved by 61%.
Profit After Tax (PAT) also increased by 61%.
For H1 FY 2023-24:
Total revenue for the first half of the year increased by 38%.
Revenue from operations in the corresponding half-year period increased by 27%.
Operational EBIDTA increased by 33%.
Profit Before Tax (PBT) improved by 69%.
Profit After Tax (PAT) increased by 69%.
Additionally:
The company’s order book as of the date stands at INR 1003.27 Crores.
Orders negotiated but not yet received are at INR 78.78 Crores.
Including converted negotiated orders, the total order book reaches INR 1,082 Crores.
Mr. Srinivasagopalan Rangarajan, Chairman & Managing Director of Data Patterns (India) Limited, expressed satisfaction with the strong revenues and order inflow for Q2 and H1 FY24. The company is committed to further investments in product development to capitalize on the opportunities in the defense program run by the Government of India.
Singapore sovereign wealth fund GIC bought a 6.3% stake for ₹650 crore, while Mirae Asset Mutual Fund acquired about a 2% stake for ₹201 crore. Similarly, Kotak Mahindra Mutual Fund purchased shares worth ₹100 crore, and HDFC Mutual Fund bought ₹25 crore worth of shares.
In the below tracker, I have started tracking important company goals for Data Patterns.These goals are referred to as ‘monitorables’ in the tracker.I will update this document regularly to reflect the current status of these goals.
Here’s a snapshot of what the tracker includes:
Company Ticker: For identifying the company
Monitorable Description: Description of the goal or metric being tracked
Date of Announcement: When the monitorable was announced
Deadline: Target date for achieving the monitorable
Status: Current progress (e.g., Not Fulfilled, Pending)
Verification Link: A link to see where we got the information about the goal.
I hope this information makes it easier to observe how well companies are progressing towards their stated goals.
