Buy Datamatics; target of Rs 1,130: Choice Institutional Equities

Choice Institutional Equitie's research report on Datamatics

DATAMATICS guided for mid-teens top-line growth, including mid-single digit organic growth in FY26. This will be led by strong inorganic revenues from TNQtech acquisition, with scaling up of strategic accounts, geographic expansion, new deals and cross-selling. Moreover, the company is focused on scaling up AI-led Product revenues within the Digital Technologies space, which witnessed a strong growth in Q2. Additionally, it aims to invest INR 400-500Mn annually on new innovations (including AI) to stay relevant on technology landscape from long-term.

Outlook

It is also focused on optimizing cost and maintaining margins, to drive profitable growth head. We believe the recent operational initiatives at DATAMATICS are likely to drive an improved growth and margin trajectory. Hence, we have revised our estimates upward and expect the Revenue/EBIT/PAT to expand at 11.8%/ 24.4%/ 16.4% CAGR over FY25–28E. With improved clarity on growth and margin trajectory, along with peer valuation dynamics, we have re-rated the stock with a revised Target Price of INR 1,130 (earlier INR 940) and recommend a ‘BUY’ rating based on FY27E & FY28E average EPS of INR 51.5, applying a 22x PE multiple (earlier 20x).

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