Stock of this defence company has zoomed 87% over its issue price

Shares of Data Patterns (India) hit a record high of Rs 1,093.50 on the BSE in Monday’s intra-day trade as the stock rallied nearly 15 per cent on heavy volumes. The stock was quoting higher for the fifth straight trading day having surged 30 per cent during this time.

At 12:26 pm; it was up 13 per cent as compared to a 1.3 per cent decline in the S&P BSE Sensex. The average trading volumes on the counter jumped an over five-fold with a combined 1.3 million equity shares having changed hands on the NSE and BSE.

With a sharp rally in the past couple of days, currently the stock is around 87 per cent higher over its issue price of Rs 585 per share on the BSE. The company made its stock market debut on December 24, 2021.

Data Patterns is a vertically integrated defense and aerospace electronics solutions provider catering to the indigenously developed defense products industry.

Having completed all the major sub-systems in radar, electronic warfare, communications, avionics, etc. Data Patterns is now focusing on developing complete systems with in-house design to address the huge market opportunities in the Indian Defence and Aerospace segment thanks to the Atmanirbhar Bharat initiatives and defence procurement procedure being modified to enable more ‘Make in India’ defence equipment.

As on June 30, 2022, Data Patterns had Rs 663.55 crore of orders in hand. The company said letter of intent (LOI) has been received for Rs 173.57 crore of orders, with negotiation being completed and awaiting LOI for Rs 168.62 crore of orders. If all the projects where negotiations are completed are converted into orders, the order book will be more than Rs 1,000 crore, the company said.

India intends to moderate imports and seek a larger proportion of its defence and space requirements from within. The government banned the import of 101 defence products; the Defence Research and Development Organisation (DRDO) announced the indigenization of 108 systems and sub-systems. The tender sizes have increased and the order books of defence product manufacturers are beginning to grow; defence players have embarked on capital investment programmes; the sectorial employment base is beginning to widen, Data Patterns said in its FY22 annual report.

A leading industry expert estimated that the market opportunity for defence electronics in India would be around $70-72 billion in a decade. This would result in the development of the next frontier of technology, comprising plasma-based rocket technology, stealth technology and deep technology to address military applications, the company said.

According to analysts at ICICI Securities, the strong order inflows with healthy pipeline of orders worth Rs 2,000-3,000 crore in the next two to three years provides strong visibility. The defence electronics provides huge opportunity of around Rs 1.5 trillion crore in the next four to five years led by armed forces’ requirement of advanced systems.

The fire control system for Brahmos missile, Avionics for LCA, RWR for Fighter Aircraft, ELINT for Airborne and Ground Platform and radar subsystems are key orders in pipeline in FY23 for Data Patterns. The large part of electronic components (used in Indian defence platforms) are supplied by foreign OEMs. As indigenisation efforts continue, future procurement will see a large portion of defence electronics sourced locally, the brokerage said in its Q1 result update.

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