Buy This Aerospace And Defence Stock For Decent Gains In Short To Medium Term

Markets after two day's breather again tumbled in trade on May 18, 2022 precisely on profit booking. Nevertheless, ICICI Direct has come up with its 'Buy' recommendation on a stock from the aerospace and defence space. The 'Buy' suggested for 12-18 months can let you make gain to the tune over 20%. Here is what the brokerage has to say about the stock and its likely stock performance going ahead

About the company

Data Patterns is a recent debutant on the stock exchanges. The small cap company is a vertically integrated defence and aerospace electronics solutions provider. The company caters to the indigenously developed defence products industry.

Financials: As per the brokerage, Data Patterns has delivered revenue, PAT CAGR of 30.7%, 168%,
respectively, in FY19-21. The 9MFY22 revenues increased 110% YoY with EBITDA and PAT CAGR at 89% and 168%, respectively, during the period

 

Key triggers for future price performance

Defence electronics provides a huge opportunity of around Rs. 1.5 lakh crore in the next four to five years led by armed forces' requirement of advanced systems.

Defence electronics makes up only 25-35% of the cost of platforms used by the Indian armed forces, which is expected to increase in future

At present over 60% of electronic components used are supplied by foreign OEMs. As ndigenisation efforts continue, future procurement will see a large portion of defence electronics sourced locally.

DPIL has proven in-house design and development capabilities and experience of more than three decades in the defence and aerospace electronics space across all the platforms - space, air, land and sea

Healthy order book position; sturdy pipeline of orders worth around Rs. 2,000 crore
in the next two to three years provides strong visibility

Brokerage's suggestion on Data Patterns to investors:

"DPIL is well placed to deliver revenue and PAT CAGR of 27.6% and 29.5% respectively, over FY22-24E. Increase in profitability with strong asset turnover will result in healthy return ratios over FY23-24E. We initiate coverage with a BUY recommendation on the stock and value the stock at Rs.886, on 32x P/E on FY24E EPS basis.

 

Disclaimer

The stock has been taken from the report of ICICI Direct. Investing in stocks is risky and investors must exercise caution. Greynium Information Technologies Pvt Ltd, the author and the broking house are not responsible for losses incurred based on the article.