A niche defense play!
A niche player with strong competitive positioning: Zen Technologies (ZEN) is a niche player in the defense simulator-based training market. The company has also forayed into the counter-drone market. The addressable markets for simulators and counter-drones in India are estimated at ~INR140b and INR120b, respectively, over the next five years. The company commands a significant market share in both of these segments, with just 2-3 players in the defense simulator market and 5-6 players in the counter-drone market.
Healthy financials backed by a robust order book: ZEN has established a strong vendor base for simulators and has achieved backward integration for counterdrone solutions, resulting in strong margins and a high RoCE. The company is also planning to foray into newer defense segments. With a healthy order book of INR14b and a likely inflow CAGR of 37% over the next three years, we expect its revenue/EBITDA/PAT to clock a CAGR of 63%/57%/56% over FY24-27.
Valuation and View: We value the stock at 40x Jun’26E earnings. We initiate coverage on the stock with a BUY rating and a TP of INR1,775. We expect the company to: 1) grow at a much faster pace than the industry, 2) have a very strong margin, and 3) expand its capabilities across other defense segments.
Zen Technologies is a niche defense play! Buy for target price of ₹1775 (31% upside) Motilal Oswal
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