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Up 21% from IPO worth, ICICI Direct initiates coverage of Data Patterns stock, sees another 25% upside

After having been listed at a pointy premium over the IPO worth, shares of Data Patterns (India) have now scaled decrease from their highs amid varied headwinds on Dalal Street. However, the stock nonetheless trades at near a 20% premium to the problem worth and analysts at ICICI Direct consider they might go larger. Initiating the coverage of Data patterns, ICICI Direct has pinned a ‘Buy’ tag on the stock with a goal worth of Rs 886, which is almost 25% above the present buying and selling worth of Rs 711 apiece. Shares of Data Patterns had been listed on NSE and BSE in December final year.

Defence electronics house gives big alternative

Data Patterns is a vertically built-in defence and aerospace electronics options supplier catering to the indigenously developed defence merchandise trade. Analysts consider that the Defence electronics house, the place Data Patterns operates, gives an enormous alternative. “With defence public sector units (DPSUs) focusing on specialisation, integration and subcomponent manufacture being outsourced to the private industry, there are consequent expanded opportunities for the private sector,” the observe mentioned. 

In the earlier Union Budget, the federal government earmarked Rs 84,598 crore, 68% of the army’s capital acquisition price range, for buying domestically produced weapons and techniques to spice up self-reliance within the defence sector. ICICI Direct mentioned that at current, defence electronics make up solely 25-35% of the price of platforms utilized by the Indian armed forces, which is anticipated to extend in future. “Data Pattern has established itself as a vertically integrated defence and aerospace electronics solutions provider to indigenously developed defence products industry,” ICICI Direct added.

Healthy order guide

Data Patterns has a wholesome order guide standing at Rs 577 crore as of December 2021 finish, of which 68% had been manufacturing contracts whereas 22% and 10% of contracts had been growth and companies contracts, respectively. The company is at present engaged within the provide of merchandise to a number of prestigious defence tasks in India, together with the LCA, the HAL Dhruv, LUH and the BrahMos missile programme, based on the brokerage agency.

The company’s administration has additional guided that it’s on monitor to get orders price practically Rs 500 crore in FY23. “The company expects a pipeline of over Rs 2,000 crore contracts, which are likely to be placed over the next two to three years,” ICICI Direct mentioned. 

Firm to stay web money

Data Patterns IPO was a mixture of a contemporary situation and a suggestion on the market. The company has utilised the IPO proceeds to repay its debt absolutely, funding capex on the Chennai facility and funding working capital necessities. “We expect the company to remain a net cash company now for the period FY22-24E led by an increase in profitability,” analysts mentioned. ICICI Direct values the company at Rs 886 per share, on 32x P/E on FY24E EPS foundation.

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