This defence stock zoomed 175% in a year; should you buy?

Shares of Data Patterns India Ltd have delivered 175% returns to investors in the last one year. The shares of defence and aerospace solutions provider, which closed at Rs 745.6 on July 19 last year ended at Rs 2,052.40 on the BSE on Wednesday, delivering 175.27% returns during the period. An amount of Rs 1 lakh invested in the shares of Data Patterns India a year ago would have turned into Rs 2.75 lakh today. In comparison, Sensex has risen 22.51 per cent during the period. 

The stock, which was listed on the bourses on December 24, 2021 with a premium of 47% over the IPO price has delivered 137% returns during the period.  

The stock listed at Rs 864 on the BSE against the IPO issue price of Rs 585. On NSE, the market debut price was Rs 856.  

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The stock hit an all-time high of Rs 2250.75 on July 13, 2023 and a 52 week low of Rs 712.85 on  July 19, 2022. 

Currently, Data Patterns stock is trading 9% lower to its record high. In the previous session, Data Patterns India stock fell 1.05% to Rs 2052.40 against the previous close of Rs  2074.15 on BSE. Earlier, Data Patterns stock opened higher at Rs 2096.95. Market cap of the firm fell to Rs 11,490.15 crore. Data Patterns shares have gained 87.33 per cent since the beginning of this year. Total 0.12 lakh shares of the firm changed hands amounting to a turnover of Rs 2.38 crore on BSE.  

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In terms of technicals, the relative strength index (RSI) of Data Patterns stands at 64.3, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 1 , indicating average volatility during the period. Data Patterns stock is trading higher than the 20-day, 50-day, 100-day and 200-day moving averages. 

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Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher, said, "The stock has witnessed a decent rally in the past two weeks and has resisted near the peak zone of Rs 2250 levels with some profit booking seen and has got near term support zone near Rs 1950 levels where it can again consolidate. Once again a decisive move past Rs 2250 zone shall trigger for a fresh breakout and one can expect Rs 2380-2420 levels as the next targets."

Phillip Capital has a neutral rating on the stock with a target of Rs 1,858. 

"We value Data Patterns at  35 times Sept'25  PER  (15% discount  to  average  PE  of  41x),  as  we  build  in  relatively lower earnings CAGR of 39% over FY23-26, compared to 49% CAGR over FY21-23. The valuation  premium  we  have assigned  to  defence  PSUs  reflects  a  structural  growth opportunity,  superior  return  ratios,  and  strong  balance  sheet. We initiate coverage with a neutral rating and a target of Rs 1,858, valuing at 35x Sept'25 EPS."

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Abhijeet from Tips2trades said, “Data Patterns stock price is bearish & overbought on the Daily charts with strong resistance at Rs 2174. Investors should book profits at current levels as a close below support of Rs 1980 could lead to Rs 1790 in the near term." 

The Chennai-based electronics solution provider to the defence and aerospace sector, logged a 10 per cent fall in net profit to Rs 55.34 crore in Q4 of the last fiscal against Rs 61.63 crore for the corresponding period of last year. Revenue climbed marginally to Rs 188.90 crore against Rs 173.07 crore in the corresponding period of the previous fiscal.  

Net profit rose 32 per cent to Rs 124 crore in FY23 compared to Rs 94 crore in FY22. Net revenue for FY23 climbed 46 per cent to Rs 453 crore against Rs 311 crore in the previous fiscal.  

Data Patterns (India) Limited is an India-based vertically integrated defence and aerospace electronics solutions provider catering to the indigenously developed defense products industry. Its portfolio includes COTS Boards, ATE and Test systems, Space Systems, and Radio Frequency and Microwave. It designs COTS module products that are used in rugged applications and automatic test equipment platforms.   

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