DATAPATTNS - Data Patterns (India) Limited Share Price

Management's outlook for Data Patterns (India) Limited remains positive, targeting 20"“25% revenue growth for FY25 while maintaining EBITDA margins of 35"“40%. Key highlights include:

1. Order Book & Inflows:

   • Order book stands at INR 1,184 crore (as of Q3), including INR 89 crore negotiated.
   • Export orders now contribute INR 106 crore to the order book, reflecting diversification into Europe and East Asia.
   • Anticipates securing INR 20"“30 billion in new orders over the next 18 months.

2. Growth Drivers:

   • Export Momentum: Increased focus on international markets, with exports driving Q3 revenue and order inflow.
   • R&D Investment: Prioritizing indigenous product development, with new systems to be showcased at the Defence Expo 2025.
   • Defense Budget Tailwinds: The Indian government's INR 6.8 lakh crore defense budget (FY25"“26) and 75% allocation for indigenous procurement create opportunities.

3. Financial Performance:

   • Q3 revenue grew 29% QoQ to INR 117 crore, led by radar (62%) and ATE (18%) segments.
   • Gross margins improved to 80% in Q3 (up 1,260 bps), supported by favorable product mix.

4. Strategic Shifts:

   • Transitioning from subsystems to integrated system solutions to address larger opportunities.
   • Strengthening delivery capabilities and workforce training to meet global demand.

Management remains confident in Q4 execution despite temporary customer deferments and aims to leverage India's defense indigenization push and export potential for sustained growth.

Question 1:
"Over the years, we have moved from a revenue guidance of ~30% to 20-25%. What challenges are causing this, and what triggers could restore higher growth?"
Answer: Challenges include long gestation periods for defense contracts and reliance on historical order pipelines. Higher growth requires expanding addressable markets via new product development, securing large orders, and building a 3"“5-year order backlog. Investments in R&D and global competitiveness aim to drive future scalability.

Question 2:
"What is the order inflow guidance for FY25, and can you highlight major orders in the INR20-30B 18-month pipeline?"
Answer: Specific order details were withheld due to confidentiality. The guidance remains INR20-30B over 18 months, driven by defense budget allocations, export opportunities, and participation in large programs. Delayed decisions on bids are expected to resolve in the next 3-4 months.

Question 3:
"Execution delays impacted revenue. When will deliveries normalize?"
Answer: Delays (e.g., INR70Cr deferments) are due to customer clearance delays. Products are ready, and inspections are expected soon. Q4 shipments are planned, with proactive prepayment strategies for delayed contracts to meet annual guidance.

Question 4:
"Export revenue surged. Which segments contributed, and what is the execution outlook?"
Answer: Initial export success includes radar and avionics orders for European markets. Margins are competitive but not necessarily higher. Focus is on system-level products, marketing infrastructure, and showcasing indigenous innovations at global expos to scale exports.

Question 5:
"Will margins decline due to lower-margin contracts and exports?"
Answer: Margin stability is targeted via a balanced product mix. While some production contracts have lower margins, IP-driven domestic projects and export competitiveness aim to sustain EBITDA margins at 35-40%. PAT growth will prioritize absolute value over margin percentages.

Question 6:
"Inventory days rose to 187. Will this normalize by FY25?"
Answer: Elevated inventory stems from two large radar projects (50-60% of inventory). Deliveries for one project are expected by March 2025, reducing inventory days. Normalization is anticipated post-delivery, with future contracts emphasizing IP-driven models over material-heavy execution.

Question 7:
"Are defense indigenization and ordering slowing down?"
Answer: No slowdown observed. Government is streamlining procurement, prioritizing indigenous capability-building. Defense budget hikes (INR6.8T for FY25) and policy reforms support growth. Delays are procedural, not strategic, with strong momentum for domestic manufacturing.

Question 8:
"How will INR500Cr QIP funds impact product development and revenue?"
Answer: ~INR85Cr spent on radar, EW, and software-defined radio projects. Development focuses on reusable IP blocks for faster bidding. Revenue from these products is expected in 12-18 months, with Aero India 2025 showcasing innovations to accelerate order conversions.

Question 9:
"Can Q4 revenue meet guidance if deferred orders slip further?"
Answer: Management is confident in achieving guidance via alternate execution (preponing next-year orders) and expects pending inspections/clearances to resolve in March. Proactive customer engagement ensures backup plans for revenue targets.