Daily Stock Market News

Zen Tech: After a 2600% surge in 5 years, Nuvama projects 70% more upside for this small


Zen Technologies, a leader in defense simulation and anti-drone technology, has been gaining significant attention in India’s defense sector, driven by government initiatives and an increasing focus on advanced technology. Over the past two years, the stock has delivered an impressive 700 per cent return to its shareholders and a whopping 2600 per cent in last five years. 

This upward momentum is likely to continue, according to domestic brokerage firm Nuvama Institutional Equities, as it has initiated coverage on Zen Technologies with a strong ‘buy’ rating, citing the company’s robust growth prospects and a solid order book.

The brokerage has set a 12-month target price of 2,200, which suggests a 32 per cent upside from the stock’s previous closing price, with a bullish target of 2,818 (70 per cent upside) in the coming years. Nuvama argues that Zen Technologies’ premium valuation is justified due to its high-growth potential.

Also Read | Zen Technologies shares jump 4% as Motilal Oswal assigns ‘Buy’, sees 31% upside

Nuvama emphasized that Zen Technologies is one of the few suppliers of essential defense simulators, which enhance the readiness and capabilities of the armed forces. The company’s competitive edge lies in its in-house intellectual property, with over 75 patents, and its cutting-edge anti-drone systems, positioning it for sustained growth.

Defence simulators: Enhancing military readiness

India’s Ministry of Defence introduced the “Framework for Simulators in Armed Forces” in 2021, aiming to enhance training through simulation-based methods. This framework emphasizes the cost-effectiveness, safety, and precision of using simulators, which offer near-realistic training experiences for combatants.

The shift to simulation-based training is a strategic move that addresses budget constraints while ensuring high-quality training for soldiers, thereby preserving on-field equipment and reducing expenses.

Also Read | Mukul Agrawal books profit in multibagger drone stock Zen Technologies

Zen Technologies is one of the only few manufacturers of defence simulation in India having in-house IP/tech and enjoys 80–90 per cent market share for its land-based simulation product offerings.

Anti-drone systems (ADS): India racing ahead

In addition to its leadership in defense simulation, Zen Technologies entered the anti-drone systems market in 2021, a sector that is witnessing rapid growth. According to the brokerage estimates, the global anti-drone market is set to expand at a CAGR of 28 per cent, and India, contributing 8-10 per cent of this market, is poised for similar growth.

The Indian market is expected to grow from USD 255 million in FY24 to USD 881 million by FY29, driven by rising security concerns and technological advancements.

Also Read | Defence, Railways, Capital goods trading at elevated valuations- Ajit Mishra

Zen’s anti-drone solutions, which include both hard and soft kill systems, are crucial for national security, especially for protecting sensitive areas like borders, military installations, and strategic locations such as airports and nuclear plants. The high demand for anti-drone systems with a range of up to 5 km is expected to drive growth further.

Stellar order backlog

Nuvama Institutional Equities has placed its confidence in Zen Technologies, citing the company’s remarkable order book and long-term growth potential. Zen currently sits on a backlog worth 14 billion—four times its FY24 sales—with a pipeline of 40 billion over the next two to three years.

This massive order book reflects the growing demand for its simulators and anti-drone solutions, both domestically and in export markets.

Also Read | Bharat Electronics secures orders worth ₹1,155 crore

What sets Zen apart is its investment in research and development (R&D). With over 75 patents and more than 150 pending, the company demonstrates its commitment to innovation. Its foray into emerging segments, like anti-drone systems, has expanded its total addressable market, and its focus on in-house design ensures it maintains a competitive edge.

Nuvama projects that Zen Technologies will achieve over 54 per cent CAGR in earnings per share (EPS) over FY24-27, driven by increasing simulation penetration, government-focused initiatives like the Agniveer scheme, and Zen’s expansion into new markets.

Also Read | Zen Technologies shares rise 4.40% on securing ₹42 crore export order

The company boasts some of the highest gross margins in the defense sector, between 65-75 per cent, and an impressive return on equity (RoE) and return on capital employed (RoCE) of over 22 per cent. This, combined with its focus on in-house R&D and the burgeoning defense market, makes Zen Technologies a strong player in India’s defense ecosystem.

“ZTL is an IP-focused defence proxy play owing to its advanced in-house design and development capabilities, which justify its valuation premium in our view,” said Nuvama.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess



Read More: Zen Tech: After a 2600% surge in 5 years, Nuvama projects 70% more upside for this small

You might also like