Motilal Oswal Financial Services Ltd. cited faster-than-industry growth and a healthy Ebitda margin as it initiated coverage on Zen Technologies Ltd. The brokerage has given a target price of Rs 1,775 per share for the defence stock, implying a potential upside of 31% from the previous close.
The Ministry of Defence has rolled out a comprehensive simulation framework and there is an increased focus on the Agnipath Yojana. Zen has a strong market share in both of these segments, Motilal Oswal said in a note dated July 17. "We expect Zen to benefit from its wide product portfolio in simulators, counter-drone, and new areas over the next five years."
The company has a portfolio of over 40 products designed and developed indigenously, making it a well-positioned simulator portfolio to capitalise on opportunities, it said. "Notably, the company is self-reliant and does not rely on imports for its supply chain."
The aerospace and defence company has a strong competitive advantage with a diverse customer base spanning over 100 governments. This helps the company generate a healthy Ebitda margin. Zen's aim to expand its geographical footprint will boost margin as exports are more profitable, the brokerage said.
Motilal Oswal expects a compound annual growth rate of 63% and 56% in revenue and net profit respectively during financial year 2024–27, driven by an order inflow growth of 37%, Ebitda margin and enhanced control over working capital.
Zen's stock rose as much as 3.46% in early trade to Rs 1,400 apiece on the NSE. It was trading 0.28% higher at Rs 1,357 per share, compared to a 0.13% advance in the benchmark Nifty as of 10:02 a.m.
The share price has risen 125% in the last 12 months and 71% on a year-to-date basis. The relative strength index was at 63.
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