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Data Patterns shares have surged nearly 55% in 2026 so far, with the defence electronics stock surging over 9% on Monday, 9 November, despite reporting a weak set of Q2 FY27 results. Strong order inflows and management's confidence in a better second half appear to have supported the stock's rally.
The company reported a 57% year-on-year drop in revenue to ₹133 crore for the September quarter, while net profit declined 55% to ₹22 crore. EBITDA margin, however, remained relatively stable at 23.3%.
The decline in revenue and profit was largely due to subdued execution during the quarter. However, a sharp increase in fresh orders provided some support. Data Patterns secured orders worth ₹929.1 crore in Q2 FY27, marking a 475% jump from the corresponding period last year.
The company's order book stood at ₹2,698 crore, with services accounting for 21%, development orders for 36% and production orders for the remaining 43%. While the robust order inflows have improved revenue visibility, execution will be key to converting this pipeline into growth.
According to news reports, during its earnings call, Data Patterns' management expressed confidence in delivering a stronger performance in the second half of FY27, citing its healthy order book and expectations of improved execution.
The company has retained its FY27 guidance of 20–25% revenue growth and 35–40% EBITDA margins. This comes even as revenue declined 31% year-on-year in the first half of FY27 and EBITDA margin stood at 25%. Consequently, achieving the full-year targets will require a sharp improvement in execution and profitability in the coming quarters.
Management also pointed to an opportunity pipeline of ₹2,000–4,000 crore over the next 24 months, as the company seeks to expand its presence across a broader range of defence programmes.
Data Patterns will continue to focus on developing indigenous products, with management indicating that investments in in-house product development will remain at current levels. The company has invested over ₹145 crore in new product development, with several products nearing advanced stages of readiness. It also has a team of more than 1,100 engineers working on product development and innovation.
In another key development, Data Patterns acquired a 100% stake in ST Advanced Composites for ₹10 crore in September 2026. The acquisition is expected to enhance its in-house capabilities and strengthen its ability to offer integrated systems for defence programmes.
Nuvama Institutional Equities maintained its ‘HOLD’ rating on Data Patterns, with an unchanged target price of ₹4,500, valuing the stock at 45 times its estimated FY29 earnings.
The brokerage said the company missed its profit-after-tax estimate by 67%, primarily due to weak revenue execution. Operating profit margin stood at 23%, against the Street's expectation of 33%, reflecting lower gross margins and operating deleverage.
However, order inflows increased nearly 5.6 times year-on-year to ₹929 crore, strengthening the company's order visibility. Nuvama noted that the backlog had nearly doubled to ₹1,720 crore.
Despite the weak quarterly performance, the brokerage highlighted that management had retained its FY27 guidance. This implies a sharp acceleration in execution during the second half, with sales growth of around 65–75% year-on-year and operating margins of 38–44%, according to its estimates.
Nuvama is awaiting the conversion of ₹970 crore in negotiated orders and a further opportunity pipeline of around ₹2,000 crore. Successful conversion could take the March 2027 order book to ₹3,500 crore, potentially supporting an earnings-per-share compound annual growth rate of over 30% and a return on equity of around 20%.
The brokerage said it would await order conversion before turning more positive on the stock. At the current market price, Data Patterns trades at 48 times and 40 times its estimated FY28 and FY29 earnings, respectively.
Choice Institutional Equities said Data Patterns' Q2 performance was weak and materially below its estimates. Revenue, EBITDA and profit after tax declined 56.7%, 54.2% and 55.6% year-on-year, respectively.
While the high base of Q2 FY26 partly explains the decline, revenue improved 14.8% sequentially. EBITDA margin contracted 350 basis points quarter-on-quarter to 23.5%, reflecting uneven execution of large defence programmes.
However, Choice believes Data Patterns is gradually moving up the value chain, from supplying subsystems to developing complete indigenous defence solutions. This transition could expand its addressable market and strengthen its position in larger defence programmes.
The brokerage highlighted the company's firm order book of ₹1,724 crore, along with negotiated orders worth ₹956 crore, taking total order visibility to ₹2,680 crore — equivalent to approximately 2.9 times FY26 revenue.
It also noted that the acquisition of ST Advanced Composites strengthens the company's in-house capabilities and supports its integrated-systems offering. Investments in complete systems and reusable technology platforms could improve its competitive positioning and create opportunities for revenue growth over the coming years.
Choice added that achieving management's retained FY27 guidance of 20–25% revenue growth and 35–40% EBITDA margin would require a meaningful improvement in execution during the second half.
Despite the recent rally, the stock's performance has been mixed over shorter periods. Data Patterns shares have gained 4.82% over the past week and 6.59% over the last two weeks. However, the stock has declined 1.61% in one month, 8.26% over three months and 2.02% over six months. Its year-to-date gain stands at 54.48%.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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