Zen technologies – A micro cap in the defense space!

Notes from the Q1 FY 25 call

• On track to achieve guidance of 900 cr revenue for full FY. EBITDA margin to be around 35% and PAT 25%

• Order book – 1200 to 1300 crore by Q2 / Q3 end is what was earlier guided by management – emphasized that they are on target to achieve that order book. And expecting strong order inflow in later part of the year. Were expecting Q1 to be a little soft on order book

• Launch of New products – (from the recent acquisition) – Witnessing Extremely healthy demand for these products. They actually showcased the new products during the call, a really commendable effort from the management

  • Hawkeye – epitomizes a state-of-the-art anti-drone system camera
  • Barbarik – URCWS is the world’s lightest remote-controlled weapon station (weighs less than 40 kg), offering precise targeting capabilities (5.56mm to 7.62mm calibers) for ground vehicles and naval vessels.
  • Prahasta – a revolutionary automated quadruped that uses LIDAR and reinforcement learning to understand and create real-time 3D terrain mapping for unparalleled mission planning, navigation and threat assessment. Can be used as first line of defence in 26/11 kind of scenarios
  • Sthir Stab 640 – a rugged stabilized sight designed mainly for armoured vehicles, ICVs, and boats

• This will be an additional stream of revenue (from these products); in addition to the revenue guidance shared earlier. This is a more established field unlike simulators and anti-drones. There are established players in the segment.

• Strong tailwinds – Indian defence mkt is on a different trajectory. Govt pursuing simulator procurement in a big manner. Orders received so far is just the beginning. Good demand for simulators in airforce and navy too

• Indian army has one of the toughest screening criteria for procurement. While approaching overseas clients for exports, first question is ‘Have you sold it to the Indian Army’ post which they look at other points

• Exports – much larger market than domestic.

  • Margins depend on risk involved, export margins are usually higher than domestic margin
  • Some of the companies overseas were highly appreciative and were stunned by the skill sets and capabilities of companies like Zen Tech. Gave the illustration of Containerized tank simulator to explain.

• QIP – Only taken the enabling resolution . no funds raised yet

• Exploring inorganic growth opportunities through acquisitions, will be able to give more guidance in upcoming quarters