Are Data Patterns (India) Ltd latest results good or bad?

Data Patterns (India) Ltd reported its financial results for the quarter ended September 2025, showcasing significant revenue growth driven by the defence sector's project-based revenue recognition model. The company achieved net sales of ₹307.46 crores, reflecting a substantial quarter-on-quarter increase of 209.53% from ₹99.33 crores in the previous quarter. This impressive growth was complemented by a net profit of ₹49.19 crores, which marked a sequential increase of 92.90% from ₹25.50 crores in the prior quarter. However, the results also highlighted notable challenges, particularly in terms of margin compression. The operating margin (excluding other income) declined to 22.27%, down from 32.30% in the previous quarter, indicating execution challenges despite the robust top-line growth. Similarly, the profit after tax (PAT) margin contracted to 16.00% from 25.67% in the prior quarter, suggesting that while revenue surged, the profitability was adversely affected by higher operational costs or lower-margin project executions. On a year-on-year basis, the revenue growth was even more pronounced, with a 237.79% increase compared to ₹91.02 crores in the same quarter of the previous year, while net profit grew by 62.44% year-on-year. This divergence between revenue and profit growth raises questions about the sustainability of the profit margins moving forward. In terms of capital efficiency, Data Patterns demonstrated a strong return on capital employed (ROCE) of 24.60%, reflecting effective capital deployment. The company operates with a zero-debt balance sheet, providing it with financial flexibility for future growth initiatives. Overall, while Data Patterns (India) Ltd exhibited strong revenue growth and maintained a solid capital efficiency profile, the significant margin compression observed in this quarter warrants further scrutiny. The company also experienced an adjustment in its evaluation, reflecting the mixed nature of its performance. Investors should monitor upcoming quarters for trends in margin recovery and order book dynamics to better assess the sustainability of its growth trajectory.