Add Data Patterns Ltd for the Target Rs. 4,060 by Choice Institutional Equities
Control Over Design Drives Margin Resilience
We continue to remain positive on the company, but more importantly, the nature of the story is clearly evolving. From what we see, the company is no longer just building capabilities – it is now getting structurally embedded into key defence platforms. This is an important shift, because growth going ahead is likely to be driven more by its positioning within long-cycle programmes.
What stood out to us is the increasing share of repeat, system-level opportunities (~INR 19,000 Mn). This, along with the pipeline commentary, suggests that reported order book may not fully capture the revenue visibility. In our view, the company is now participating deeper across platform lifecycles (seekers, radars, EW, avionics), which typically leads to more predictable and compounding revenue streams over time.
On margins, the mgmt. commentary was quite telling. It is evident that profitability here is less dependent on competition intensity and more on control over design. Wherever the company is delivering system-level work, margins are meaningfully better. So, while quarterly margins may move based on mix, we do not see structural pressure on profitability.
Putting this together, we believe the company sits in a relatively niche position – high control, limited competition and increasing platform-level relevance. If execution sustains and pipeline conversion improves, earnings could surprise on the upside, though near-term trajectory will still depend on order inflows and execution pace.
Revenue Miss; Margin Shines
* Revenue for Q4FY26 was down by 13.0% YoY and up by 99.2% QoQ at INR 3,449 Mn (vs CIE est. INR 4,358 Mn)
* EBITDA for Q4FY26 was up by 29.0% YoY and up 139.3% QoQ at INR 1,928 Mn (vs CIE est. INR 1,724 Mn). EBITDAM stood at 55.9%, expanding by 1,819 bps YoY and 937 bps QoQ (vs CIE est. of 39.5%)
* RPAT for Q4FY26 was up by 21.3% YoY and up by 137.4% QoQ at INR 1,384 Mn (vs CIE est. INR 1,318 Mn). RPAT margin expanded by 1,133 bps YoY and 645 bps QoQ, reaching 40.1% (vs CIE est. 30.2%)
View & Valuation: We maintain our positive stance on DATAPATT, underpinned by its robust long-term growth visibility, supported by a healthy orderbook and strong order pipeline. Accordingly we revise our FY27E and FY28E EPS estimate by 7.2% and 12.6%, respectively. We expect respective Revenue/EBITDA/PAT to expand at a CAGR of 20.0%/20.1%/19.0% over FY27–29E. We downgrade our rating to ‘ADD’ with an upgraded target price of INR 4,060 (earlier INR 3,600), maintaining our valuation multiple at 45x of FY28E EPS.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
