India’s aerospace and defence sector is poised for significant growth, targeting a turnover of Rs 1.75 lakh crore by 2025, including Rs 35,000 crore in exports. With a budget allocation of Rs 6.22 lakh crore for FY 2024-25, the industry is set to expand rapidly, driven by modernization and indigenous manufacturing initiatives.
With a market capitalization of Rs 17,224.24 crore, the shares of Zen Technologies Ltd were trading at Rs 1,907.65 per share, increasing around 1.37 percent as compared to the previous closing price of Rs 1,887.50 apiece.
Brokerage Recommendation:-
Nuvama Institutional Equities, one of the well-known brokerages in India, gave a ‘Buy’ call on the defence stock with a target price of Rs 2,200, indicating a potential upside of 16 percent from Friday’s low of Rs 1,899 per share.
Brokerage Rational:-
Brokerage firms remain positive on Zen Tech after the business inked a memorandum of understanding (MoU) with Florida-based AVT Simulation to enter the US defense industry. The cooperation was revealed during the National Training and Simulation Association’s Interservice/Industry Training, Simulation, and Education Conference.
The brokerage also added, that this is strategically favorable for Zen Tech, which will increase its serviceable market (details anticipated) for both simulation training and anti-drone segments while supplying (Unmanned Aerial System) UAS technology to AVT.
Moreover, the brokrage anticipates Zen Tech achieving a 50% sales CAGR, 35% operating profit margins, and 25% PAT margins during the next two to three years. The brokerage stated that an increase in order inflows in H2 FY25 is critical to maintaining this trajectory.
Financial Performance:-
Looking forward to the company’s financial performance, revenue magnified by 266 percent from Rs 66 crore in Q2FY24 to Rs 242 crore in Q2Y25. During the same period, net profit stretched drastically by 350 percent, from Rs 14 crore to Rs 63 crore.
Order book and Inflow:-
The company has an order book of ₹1,158.54 crore as of June 2024, with anticipated substantial inflow in Q4 FY2025 and ramp-up starting in Q3. Management targets ₹1,200-1,300 crore in inflow by FY2025, expecting export revenues to rise in upcoming quarters.
Market outlook:-
Demand for counter-drone systems is growing, shifting from soft-kill to hard-kill solutions. Management projects a ₹10,000 crore market over the next 3-5 years, with potential for upward revisions. Zen Technologies leads the market, owning key IPs for detectors, radar, cameras, and control systems.
Management Guidance:-
The company expects EBITDA margins of 30% for anti-drone systems and 40% for training simulators, averaging around 35%. Export margins are generally higher than domestic margins, though they vary based on customer requirements and product types.
Remarkable return:-
The stock gave a return of 81.15 percent return in six months and a multi-bagger return of 165.92 percent return in a year. As a result, If an investor invests Rs 1 lakh in the company would be worth Rs 2.65 lakhs in a year.
Company profile:-
Zen Technologies Limited is an India-based company that designs, develops, and manufactures defence training systems, based on sensors and simulator technology. The Company’s category of products includes land-based military training simulators, driving simulators, live range equipment, and anti-drone systems.
Written by:- Abhishek Singh
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