Data Patterns Gets Target Price Upgrade From Nirmal Bang On Strong R&D, Outlook
Over the next two years, Data Patterns expects to spend more than Rs 150 crore on capex, the brokerage noted.
Data Patterns (India) Ltd.'s stock got a target price upgrade from Nirmal Bang, as it sees the company's strong research and development capabilities driving performance in the future.
The brokerage visited the company's Chennai facility.
Nirmal Bang has raised the stock's target price to Rs 2,997 from Rs 2,881 earlier, while maintaining a 'buy' rating.
"We like the company due to its strong in-house R&D capabilities and deep domain knowledge in radars, electronic warfare, communication systems, avionics, satellites, and test equipment," it said.
These strengths have enabled it to serve a wide range of customers, including Ministry of Defence, Defence Research and Development Organisation, defence public sector undertakings and private sector clients, both domestically and internationally, according to the brokerage.
Moreover, the brokerage likes the company's order book, which provides solid revenue visibility, according to it. Order book is forecasted to grow at 19% annually between fiscals 2025 and 2027, increasing from Rs 1,150 crore in the current fiscal to Rs 1,640 crore by FY27.
"Furthermore, efficient execution to drive operating leverage, a net-debt free balance sheet, and continuous product development to expand the TAM (total addressable market) contribute to a superior revenue mix," it said.
The management has guided for 20-25% revenue growth and Ebitda margins of 35-40% for FY25. "Despite an evolving product mix, the company remains confident in maintaining operating margins within the 35-40% range over the next two-three years," it said.
This confidence stems from the following strategic strengths, including making the complete system from building blocks, designed in-house with IP, not dependending on any transfer of technology, and developing future-ready products, Nirmal Bang said.
The facility visited by the brokerage is currently operating at around 50% utilisation. "As a result, without committing significant capex, the company has the potential to quadruple its sales from the current configuration," Nirmal Bang said. "However, given the increasing demand for its radars and avionics, Data Patterns may face constraints due to its present capacity and will likely require additional capacity."
Over the next two years, the company expects to spend more than Rs 150 crore on capex, the brokerage noted.
