Add Data Patterns Ltd For Target Rs. 3,100- Choice Broking Ltd
Temporary lag, strategic momentum intact
We believe DATAPATT’s strong strategic investment continues to set the company on a promising trajectory. Q1 saw revenue dip due to unavoidable customer acceptance delays, but margin remained resilient. Q1 is facing hiccups, which are generally followed by aggressive R&D ramp-up cycles – not a fundamental weakness. The company holds a robust order book of INR 1,079 Cr. DATAPATT also has a strong order pipeline, comprising INR 2,000–3,000 Cr contracts over the next 18–24 months, primarily in airborne radars, EW systems, seekers and upgrade programs. It has invested ~INR 120 Cr in new products, which materially improves its TAM & makes it a substitute to import.
We expect the company’s FY26 guidance of 20–25% growth is within reach, assuming timely acceptance and conversion of development contracts into production awards. We assume EBITDA margins can recover towards the guided 35–40% range once the top line normalises. The primary upside catalysts are – successful flight trials and formal production orders for seekers, jammer pods and airborne radars.
We have introduced FY28 estimates and, based on the average FY27/28E EPS, we upgrade our rating to BUY (from ADD). The target price has been raised to INR 3,100 (from INR 2,915), maintaining our valuation multiple at 45x FY27E EPS.
Weak operational delivery; misses CIE estimates on key metrics
* INR 270 Mn near-term slippage stems from customer acceptance delays; inspections have resumed with billing expected next quarter.
* Revenue for Q1FY26 down 4.6% YoY and down 74.9% QoQ at INR 993Mn (vs CIE Est. INR 1,328Mn)
* EBIDTA for Q1FY26 down 13.7% YoY and down 78.5% QoQ at INR 321Mn (vs CIE Est. INR 478Mn). EBITDA margin stood at 32.3%, contracted 343bps YoY (vs CIE Est. 36.0%)
* PAT for Q1FY26 down 22.2% YoY and down 77.6% QoQ at INR 255Mn (vs CIE Est. INR 407Mn). PAT margin contracted by 583bps YoY, reaching 25.7% (vs CIE Est. 30.6%)
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