Company Update : Data Patterns Ltd By Elara Capital Ltd
Weak quarter amid order delays
Data Patterns (DATAPATT IN, Not Rated) witnessed top-line contraction by 16% YoY due to delay in order receipts and contract deferment. Total contract deferment was worth ~INR 700mn, of which INR 500mn was for Q3FY25 and INR 200mn for Q2FY25, which has again been deferred. Order inflows for the quarter were INR 24bn, up 142% YoY. Orderbook as on date stands at INR 11.8bn which includes orders negotiated and pending receipts of INR 892mn. However, management expects revenue target to normalize in Q4FY25 and reiterates FY25 revenue growth of 20-25% and EBITDA margin of 35-40% despite muted 9MFY25. Management expects INR 20-30bn order inflows in the next 12-18 months.
Revenue decline due to delays:
Q3 sales saw a drop of 16% YoY, due to delivery delay of some orders. Segment-wise, production revenue (at 59% share) was down 28% YoY, development revenue (at 37% share) was up 19% YoY whereas service revenue (4% share) was down 39% YoY. Revenue breakdown product-wise for Q3 was as follows: radars at 62%, automated test equipment (ATE) at 18%, avionics at 9%, annual maintenance contracts (AMC) at 3% and the rest was between electronic warfare (EW), naval systems, services and others. Exports made up nearly 76% of revenue whereas the Defence Research and Development Organization (DRDO) was at 11% and the rest was between BrahMos, Ministry of Defense, DPSU and other customers. Management expects exports to remain a significant part of revenue and retains FY25 total revenue target at 20-25% YoY growth.
Order inflows remain robust:
Order inflows in Q3 were at INR 24bn out of which 82% were production orders, 11% were developmental and the rest were service. Orderbook as on 31 December 2024 was at INR 109bn, up 4% QoQ, with radars at 57% share, avionics at 24% share, EW at 7% share, and the rest distributed between EW, AMC, ATE, FCS, naval systems and services. Major orders during the quarter include INR 798mn for EW, INR 531mn for radars, INR 530mn for avionics exports and INR 144mn for fire control systems (FCS) for BrahMos. Order inflow guidance is at INR 20-30bn for the next 2-3 years.
Q3 margin expands despite revenue contraction:
Margin witnessed a jump in Q3, expanding 320bp YoY to 46.2% despite lower revenue in the base quarter, but absolute EBITDA declined 10% YoY to INR 540mn. Employee cost rose 11% YoY and other operating cost jumped 32% YoY. Management is confident about sustaining EBITDA margin in the range of 35-40% for FY25.
Outlook remains positive despite challenges:
Management expects revenue to pick up from Q4FY25 since delays in orders are largely over and exports to remain robust in the upcoming quarters. DATAPATT raised INR 5bn in CY23 through a QIP and has utilized INR 0.8bn to date toward product development in radars, EW, communication systems and R&D. Management remains optimistic about growth despite lower-than-expected capital outlay for defence in FY26BE.
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