Broker’s Call: Zen Technologies (Buy)

Zen Technologies reported its highest-ever quarterly revenue of ₹345.1 crore, marking an impressive 98.8 per cent year-on-year increase. The company's operational EBITDA/PAT also showed strong growth, with an EBITDA margin of 38.2 per cent, aligning closely with the mid-30s range previously indicated. During the quarter, Zen secured order inflows worth ₹482 crore, expanding its consolidated order-book to ₹1,376 crore, equal to 2.0 times its FY26 revenue.

This improved execution, coupled with an expanding order-book, provides a solid revenue foundation for the second half of FY27. The company expects the CUAS segment to remain a significant growth driver in the medium term, with procurement progressing through a fast-track route. There's potential for FTP-related RFPs to commence in the coming weeks, with initial awards anticipated in Q4FY27, though delays could extend into FY28.

Zen's indigenous capabilities in CUAS, encompassing radars, detection systems, jammers, and command-and-control systems, place the company in a favorable position. Furthermore, the company's ₹400 crore in simulator opportunities and its growing naval simulation portfolio offer additional order and export potential. To reflect this improved revenue trajectory, Zen Technologies' FY27E and FY28E financial estimates have been revised.

Given the company's medium-term growth potential and its expanding technology portfolio, the target valuation multiple has been increased to 35x (from 30x). Consequently, the rating has been upgraded to Buy (from Add), and the target price has been raised to ₹2,150 (previously ₹1,850), valuing the stock at 35x the average FY28-29E EPS.