Zen Technologies - A Niche Defense Play; Motilal Oswal Initiates Coverage With A Buy

Motilal Oswal Report

We value the stock at 40 times June’26E earnings. We initiate coverage on the Zen Technologies Ltd. with a Buy rating and a target price of Rs 1,775. 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 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 ~Rs 140 billion and Rs 120 billion, respectively, over the next five years.

The company commands a significant market share in both of these segments, with just two-three players in the defense simulator market and five-six players in the counter-drone market.

Zen has established a strong vendor base for simulators and has achieved backward integration for counter drone solutions, resulting in strong margins and a high return on capital employed.

The company is also planning to foray into newer defense segments. With a healthy order book of Rs 14 billion 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.

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