Data Patterns IPO
Data Patterns India listed with a 48 percent premium against its issue price on December 24 after a strong response to its public issue.
The stock opened at Rs 864 on the BSE, and Rs 856 on the NSE, against the issue price of Rs 585.
Healthy financials, a sound orderbook, and huge growth potential, driven by the Make-in-India opportunity boosted investor sentiment.
The public offer of the defence and aerospace electronics solutions provider was subscribed 120 times, with non-institutional investors bidding for 254 times their reserved portion. Qualified institutional investors’ portion was booked 191 times, while the part set aside for retail investors was subscribed 23.14 times.
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Data Patterns averaged a revenue growth of 31 percent through FY19-FY21, and a profit growth of 169 percent, while EBITDA margin expanded from 19.5 percent to 41.1 percent during the period.
At 10:56am, the stock was trading 38 percent higher at Rs 808 on the BSE.
Should investors book the stellar listing gains or hold on to the stock? Let’s hear from analysts.
Milan Desai, Lead Equity Analyst, Angel One
Data Patterns’ strong listing is along the expected lines as the earnings multiple commanded was lower than that of MTAR and Astra Microwave. Data Patterns’ relationships with defence PSUs, ISRO and other similar entities and its capabilities have driven a strong orderbook CAGR of 60 percent since FY19.
Given the preference for indigenisation in new and modernisation programmes in defence, revenue visibility is expected to be strong in the coming years.
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With the solid listing, the stock now trades at 50x its trailing EPS. Hence, short-term investors may book profits, while long-term investors can remain invested.
Harsh Patidar, Senior Research Analyst, CapitalVia Global Research
The street was expecting such an impressive listing, but I believe Data Patterns has the potential to generate 15-20 percent returns from the current price as well in the next few quarters. The stock could cross Rs 1,100 levels. Investors who intend to hold for the long term should try to accumulate the stock on any healthy dip around Rs 725-755.
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Yesha Shah, Head of Equity Research, SAMCO Group
After a bumper listing, some profit booking is being seen in Data Patterns. The long term prospects of the company seem promising given its superior business positioning, well-diversified portfolio, robust order book and rising opportunities in the defence industry. The company has a strong financial track record and is expected to continue to perform well in the coming years. So, investors should remain invested for the longer term.
Those who invested solely for listing gains can consider selling, as listing gains may continue to dwindle given the current broader market sentiment.
Data Patterns is currently trading at a P/E of about 68 times its FY21 earnings. The valuation, though elevated, is still reasonable as compared to few listed peers. Investors can therefore adopt a buy-on-dips strategy for fresh medium-long term investments in this company.
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Rajnath Yadav, Research Analyst, Choice Broking
Data Patterns (India) is among the few vertically integrated defence & aerospace electronics solutions provider catering to the indigenously developed defence products segment.
Its demanded valuations was on higher side, but the company has the ability to expand the business and earnings.
We had given a “subscribe” rating for the issue, and believe there is limited upside in the share price. Thus, investors are recommended to book profit.
Santosh Meena, Head of Research, Swastika Investmart
The strong listing demonstrates that aerospace and defence are highly sought-after sectors. In the long run, the stock will be a wealth generator, over the next 3-5 years.
Short-term investors should keep a stop loss of Rs 790 on a closing basis. The company can grow rapidly and exponentially by taking advantage of the government’s Make-in-India initiative in the near future.
Astha Jain, Senior Research Analyst, Hem Securities
We recommend long-term investors to hold on to the stock as the company, being an indigenous integrated and strategic defence and aerospace electronics solutions provider, is well positioned to benefit from the Make in India opportunity.
The company’s innovation-focussed business model with a sound orderbook and consistent profitability makes this issue attractive.
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Prashanth Tapse, Vice President (Research), Mehta Equities
Healthy listing gains seem to be justified on the back of strong financial performance till FY21, robust orders book worth 2x of FY21 topline and diversified product catering to the entire spectrum platforms like space, air, land and sea.
The company will also massively benefit from the central government’s flagship programmes with huge export growth potential going forward.
We advise investors to book 50 percent profit considering a healthy listing and hold the rest for the medium term as the market always rewards players that have high growth potential.
Ashish Sarangi, SEBI registered-RIA, Pickright Technologies
The future multi-baggers will be companies that leverage technology which
Data Patterns does. Its revenue margin improved from 5.8 percent in FY19 to 24.5 percent in FY21, demonstrating management effectiveness and technology use.
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We will see increased profits and efficiency from the continued use of funds to service debt and expand capacity.
The difference is the industry on which the government is focusing and authorising FDI. Under the Aatmanirbhar Bharat scheme, the government is promoting self-reliance in defence production, which will aid the company’s expansion.
Divam Sharma, Co-founder, Green Portfolio
The company is one of the fastest growing in defence and aerospace electronic solutions development space. The sector attracts a lot of fancy from investors with major budget allocation from the government.
The company has maintained good topline and bottomline growth, dividend paying track record, and has a visible order book and looks fairly priced as compared to some of the listed peers in the sector.
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