Buy Data Patterns; target of Rs 3300: Choice Institutional Equities

Choice Institutional Equities's report on Data Patterns

DATAPATT demonstrates robust operational and strategic progress, reaffirming its position as one of India’s most-advanced players in defence electronics. Despite a temporary contraction in operating margin – driven by a strategic, low-margin contract – the company’s execution is strong, with profitability expected to normalise as the product mix stabilises. Adjusted for this one-off impact, margin would have remained within the guided 35–40% range, underscoring the management’s focus on cost control. The company’s order book stands at INR 6,736 Mn and complemented by a healthy INR 2,000–3,000 Cr pipeline across radars, electronic warfare and avionics programs. DATAPATT’s transition from subsystem manufacturing to full-system integration marks a pivotal shift, enabling participation in larger and more complex defence contracts. Continued R&D investments (~INR 120 Cr) in indigenous radar, seeker and jammer technologies enhance its technological depth and importsubstitution potential. The investments also help in growing DATAPATT’s export traction with global OEMs, signalling its rising credibility in international markets.

Outlook

We expect over 25% revenue growth in FY26, supported by a strong execution momentum, expanding system-level capabilities and operating leverage benefits. Margin is likely to recover towards the guided 35–40% range as deliveries scale up in the second half. In our view, the recent margin compression is a transient phase in an otherwise accelerating growth story. We maintain our BUY rating on the stock with an upwardly revised TP of INR 3,300, valuing the company at 45x avg. of FY27/28E EPS.