A small-cap defence technology firm that is also a specialist in IT software, holds a “BUY” rating from one of the top brokerage ‘ICICI Securities’. However, its target price has been downgraded from INR 2,535 to INR 1,970 because there are some concerns over order inflows. Although there is an adjustment but long-term growth prospects of the company are still solid.
Financial Performance & Market Standing
Zen Technologies was founded in 1993. It has a solid reputation in advanced defence training systems, simulators, and anti-drone technology. Zen posted a consolidated total income of INR 174.25 crore in Q3FY25 which is a steep 30.39% decline from the previous quarter’s INR 250.31 crore. On a YoY basis, revenue surged 67.94% from INR 103.75 crore in Q3FY24. The company also posted a Net profit of INR 42.67 crore in the third quarter.
Zen’s EBITDA for Q3FY25 reached INR 44.3 crore. However, the EBITDA margin declined to 29.1%, down from the 9-month average of 36.3%. Software products and services remain the primary revenue contributors.
Stock Movements & Market Trends
Zen Technologies’ stock has seen sharp fluctuations. On 21 February 2025, it closed at INR 1,072.30, down 3.72% from INR 1,113.70 the previous day. The intraday range fluctuated between INR 1,064 and INR 1,143.
The company has recently faced aggressive sell-offs, triggering a 10% lower circuit at INR 971.50 on 19 February, following a 20% drop on 18 February. This correction has wiped 30% in two sessions and 60% since January 2025. However, the long-term trajectory remains impressive: a 312% gain over two years and a 1,669% increase in five years.
Analyst Ratings & Order Flow Uncertainty
ICICI Securities upheld its buy stance but cut the price target, citing uncertainty in order inflows. The valuation multiple was lowered from 45x to 35x, yielding a revised INR 1,970 target price, incorporating FY26/27 earnings forecasts.
Other analysts followed suit:
- Nuvama lowered its target to INR 1,650 from INR 2,200 due to sluggish order inflows.
- Motilal Oswal revised its target to INR 1,600, citing delayed orders and a conservative earnings outlook.
Zen Technologies’ INR 800 crore domestic order pipeline for H1FY26 could provide a financial boost if executed on schedule.
Strategic Moves & Acquisitions
To reinforce its market position, Zen Technologies has pursued targeted acquisitions and investments:
- Acquired 100% stakes in Applied Research International (ARI) Labs.
- Invested in Vector Technics Private Limited and Bhairav Robotics.
These strategic moves aim to enhance expertise in defence training, simulators, and anti-drone solutions, setting the stage for future expansion.
Institutional Holdings & Investor Interest
As of 31 December 2024, Zen Technologies’ shareholding structure included:
- Promoters: 49.05%
- Foreign Institutional Investors (FIIs): 8.29%
- Domestic Institutional Investors (DIIs): 8.97%
- Mutual Funds: 7.05% (up from 4.55% in the previous quarter)
Technical Analysis & Future Outlook
All the moving averages in the daily timeframe suggest that the stock is currently in a bearish momentum. The Relative Strength Index (RSI) for Zen also dropped to 16.6 in the daily timeframe which signals that the stock is deeply oversold, suggesting a potential technical rebound.
However, this market correction is short-term and Zen Technologies retains strong long-term fundamentals, backed by a robust product lineup and rising demand for defence technology. Analysts advise investors to monitor order inflows and contract finalizations with the Ministry of Defence, which will significantly influence earnings.
Conclusion
Zen Technologies remains a compelling stock in the defence technology space. While order delays have led to downward target revisions, strategic acquisitions and product innovation support a positive long-term outlook. Investors with a long-term perspective may find value at current levels, particularly if the H1FY26 order execution progresses as expected.
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