From issue price of Rs 585 to lifetime high of Rs 2,484, this stock has had a spectacular run on D-Street

Stock market today: Every year, numerous companies come up with their initial public offerings (IPOs) to raise money as well as to enjoy the benefits of being in a listed space. Among them, some script history with record-breaking subscriptions, while others fizzle out with muted or poor responses from the investors.

Data Patterns is one such company whose share sale was a big hit. Investors rushed to lap up the shares that were put on offer, and on the final day, the public issue closed with an impressive 119.62 times subscription.

The company’s IPO ran between December 14, 2021, to December 16, 2021, and the scrip was listed on bourses on December 24, 2021. The issue price was Rs 585. Since then, the stock has witnessed a splendid rally. It hit an all-time high of Rs 2,484 on the BSE on September 1, 2023.

Data Patterns is a vertically integrated defence and aerospace electronics solutions provider catering to the indigenously developed defence products industry. It was incorporated as "Indus Teqsite Private Limited" on November 11, 1998, in Bangalore Karnataka as a Private Limited Company under the Companies Act, 1956.

The company’s revenue is bifurcated into three segments: production contracts (66 per cent), development contracts (29 per cent), and service contracts (5 per cent).

"Further, pursuant to the Scheme of Amalgamation, the name of our Company was changed to "Data Patterns (India) [Private] Limited" and a fresh certificate of incorporation dated August 04, 2021, was issued by the Registrar of Companies, Tamil Nadu. Our Company was subsequently converted into a public limited company and a fresh certificate of incorporation was dated September 13, 2021," the company's official website says.

Data Patterns Q1 FY24

Data Patterns (India) Ltd reported an 81.7 per cent jump in its April-June 2023 profit after tax (PAT) at Rs 25.83 crore. The integrated defence and aerospace electronics solutions provider had reported a profit after tax at Rs 14.21 crore during the corresponding quarter of the previous year.

Total revenue during the quarter under review grew to Rs 101.30 crore from Rs 70.08 crore registered in the same period last year. The company's earnings before interest, tax, depreciation, and amortisation (operational EBITDA) during the quarter under review increased by 31 per cent, to Rs 27.83 crore from Rs 21.25 crore registered in the same quarter of last financial year.

Data Patterns shareholding pattern

Source: Trendlyne.com

What analysts say

InCred Equities says that Data Patterns is a high-growth company with consistent margins and improving return ratios. It expects its strong momentum to continue in the medium term. It further said that a robust order backlog with a strong order pipeline and a focus on in-house product development and exports will aid high growth and margins.

High growth to sustain as the share of production contracts rises

Dipen Vakil, a research analyst with InCred Equities, said that in-house design and development contracts open new opportunities (29 per cent of FY23 sales) for the company. The higher share of development contracts in the order book is a positive sign as these contracts may translate into future production and export orders. Once they are in the production stage, repeat and large-volume orders could boost the revenue from production contracts (66 per cent of FY23 sales).

The brokerage further said it expects Data Patterns to post a revenue CAGR of nearly 42 per cent over FY20-23 because of a lower base and improving order book. "FY23 revenue grew by 46 per cent YoY, led by better planning and execution of orders in hand. The higher EBITDA margin (nearly 40 per cent) is likely to be sustained owing to a greater impetus to in-house development and production. We forecast an EBITDA CAGR of 44 per cent over FY23-FY26F, with margins sustaining their 40 per cent -42 per cent range," the report added.

View and rating

InCred Equities said that it feels the expansion in a manufacturing facility and an experienced management team (average experience of 20 years+) will help Data Patterns to achieve sales and EPS CAGR of 38%/ 45%, respectively, over FY23-26F. "We expect the company to post healthy RoE/RoCE of nearly 22% by FY26F," it said in a report dated September 13.

The brokerage has initiated the coverage on the stock with an ADD rating and a target price of Rs 3,000 (50x Sep 2024F EPS), implying a 47 per cent upside from the CMP.

Downside risks: Lower-than-expected new order wins and margins, and any budgetary cut or delay by the government.