Defence Stock Boom? Data Patterns Skyrockets 237% Revenue – Will Margins Hit 40%?

Author

Satyam Jha | Whalesbook News Team

Detailed Coverage:

Data Patterns (India) Limited announced a significant 237.8% year-on-year increase in revenues for the second quarter of fiscal year 2026. This growth was primarily fueled by the development segment, which contributed 63% of the total revenue, followed by production (33%) and service segments (4%).

EBITDA margins saw a decrease of 1541 basis points, reaching 22.2% year-on-year. This was attributed to the execution of a strategic, low-margin contract worth ₹180 crore, undertaken to secure long-term opportunities. Despite the margin dip, the company managed to boost its net profit by 62.5% year-on-year to ₹49 crore.

The company's order book stands strong at ₹1,286 crore, representing 1.81 times its annual revenue, providing good visibility for future performance. Additionally, Data Patterns expects approximately ₹550 crore in orders to be finalized in the next 3-4 months and anticipates ₹1000 crore in order inflows for the remainder of the year. Over the next 18-24 months, substantial orders worth ₹2000-3000 crore are projected.

The potential market for Data Patterns is now estimated to be between ₹15,000-20,000 crore, driven by major indigenous defence projects like radars for MiG-29, BrahMos seekers, and Self-Protection Jammer pods for Su-30MKI.

Earnings Outlook: Data Patterns has reaffirmed its revenue growth guidance of 20-25% for FY'26. Margins are expected to improve in the second half of FY'26 with a better product mix, targeting EBITDA margins of 35-40%. The company is transforming from a component supplier to a full systems integrator, which is expected to drive new contracts and exports.

Impact: This news is highly significant for investors in Data Patterns and the broader Indian defence sector. The strong revenue growth and robust order book indicate solid execution and future potential. The company's strategic shift towards systems integration and focus on exports are key growth drivers. However, the current valuation of 40x FY28 estimated earnings suggests high growth expectations are already factored in, making timely execution critical. The market will be watching for margin recovery and successful large contract finalization. Rating: 7/10

Difficult Terms: EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance. YoY: Year-on-Year. A comparison of financial results from one year to the corresponding period in the previous year. Basis points: A unit of measure equal to 1/100th of 1% (0.01%). Used for measuring small changes, especially in interest rates or financial margins. Systems Integrator: A company that combines distinct subsystem and components into a single system and ensures that these subsystems function together. Indigenous: Produced or developed within a particular country; not imported. DRDO: Defence Research and Development Organisation. India's government agency responsible for the design and development of defence technology. Capex: Capital Expenditure. Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plant, or equipment.