Broker’s Call: Data Patterns India (Buy)
The management has retained its FY27 guidance of 20-25% revenue growth and 35-40% EBITDA margin. Achieving this guidance would require a meaningful improvement in execution in H2FY27
Data Patterns reported a weak Q2 performance that fell significantly short of expectations, with revenue, EBITDA, and PAT declining by 56.7%, 54.2%, and 55.6% year-on-year, respectively. While the high base from the previous quarter partially explains the decline, revenue did improve by 14.8% on a quarter-over-quarter basis. EBITDAM stood at 23.5%, a 350-basis point contraction from the previous quarter due to uneven execution of large defense programs.
The company believes it is gradually transitioning to develop more complete indigenous defense solutions, which could expand its addressable market and strengthen its position in larger defense contracts. The firm order book of ₹1,724 crore and negotiated orders of ₹956 crore bring the total order visibility to ₹2,680 crore, equivalent to approximately 2.9 times FY26 revenue.
The acquisition of ST Advanced Composites strengthens the company's in-house capabilities and supports its integrated-system offering. Management has retained its FY27 guidance of 20-25% revenue growth and 35-40% EBITDA margin, requiring meaningful execution improvements in the second half of FY27 to achieve this goal.
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