29-11-2024 12:19 PM | Source: JM Financial Services Ltd
Buy Data Patterns India Ltd For Target Rs.2,860 By JM Financial Services

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Deferment of delivery at customer end impacted performance

Data Pattern 2QFY25 numbers were miss on estimates, mainly on account of deferment of scheduled delivery worth INR 270mn. Hence revenue reported a 16% YoY de-growth to INR 910mn. PAT declined 10% YoY to INR 303mn, partly aided by higher other income and lower tax rate YoY. Order inflow for 2QFY25 too some delay in finalisation resulting in inflows worth INR 453mn (down 69% YoY). However management is confident to reach inflows target of INR 7-8bn (INR 835mn in 1HFY25), largely on back of strong L1 position (orders negotiated but yet to receive) of INR 2.3bn, and orders worth INR 830mn booked in month of Oct’24. Order book as 2QFY25 stands at INR 9.7bn (1.9x TTM sales). Company continues to focus on developing new products that can help company to participate in large tenders thereby expanding its TAM going forward.

Delivery deferment impacted revenue:

Revenue declined 16% YoY to INR 910mn (JMFe INR 1.1bn). Gross margins expanded to 76% vs 67.7% YoY, likely due to execution mix. EBITDA declined 15.8%YoY at INR 343mn, (JMFe of INR 414mn). EBITDA margin remained flat YoY at 37.7%, (JMFe 36.7%), impacted due to negative operating leverage. PAT declined 10.4% YoY to INR 303mn (JMFe INR 346mn).

Spent INR 670mn in last 12 months towards product development:

Company has been working towards building complete systems, from building blocks, designed in-house with IP. Product development is mostly in four areas 1) Airborne Radars, 2) Electronic Warfare suites and 3) products for Make II programme (Radars and EW) and 4) Communication systems. Expect to roll out one large product in next 3-4 months which can be targeted to all three forces Army, Navy and Air force.

Order book stands at INR 9.7bn as on 2QFY25:

Order inflow in 1HFY25 came in at INR 835mn vs INR 2.8bn, which was mainly impacted due to deferment of order finalization. However these orders are expected to be received in 2HFY25. Order book as on 2QFY25 stands at INR 9.7bn (1.9x TTM sales). Orders negotiated and yet to receive till date stands at INR 2.3bn. Key orders bagged includes 1) Avionic order for exports worth INR 157mn, 2) Avionics production order from DRDO worth INR 56mn, 3) Naval system production order from BEL worth INR 20mn etc.

Maintain Buy with TP of INR 2,860:

We remain positive on stock in long run due to inhouse design capabilities, strong order backlog & pipeline, sustained EBITDA margins and focus on product development to increase TAM. However, factoring in continued delay in execution, order inflows and slower pickup in EBITDA margin expansion due to higher contribution of development contracts, we have lowered our EPS estimates by 6.1%/7.9%/11.5% for FY25/26/27E. However, due to steep correction in stock price in last four months we maintain BUY with TP of INR 2,860 valuing it at 50xSep’26E (57x Sep’26 earlier), factoring in continued lower inflows and delayed execution.

Key risk:

Slowdown in government spending on defence, weak order inflows and delay in new product pickup.

 

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SEBI Registration Number is INM000010361

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