615% rally in 3 years! Multibagger defence stock rises 4% on ₹152-crore govt order, gains 18% in 6 days; buy or sell?

Zen Technologies Share Price Today: Zen Technologies Ltd's share price gained over four per cent on Friday, March 28, and rallied nearly 18 per cent in the last six sessions, extending its winning streak on strong fundamentals. Amid a volatile market on global cues, the defence private major shares have dived 40 per cent year-to-date (YTD). The multi-bagger defence stock has delivered 614 per cent returns to investors in three years.

Zen Technologies, India's leading anti-drone technology and Defence training solutions provider, announced on Thursday that it has won a ₹152-crore order from the Ministry of Defence to supply Zen Tech's state-of-the-art integrated air defence combat simulator.

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Multibagger Zen Tech bags ₹152-crore order from Defence Ministry

“…We are pleased to announce that the company has been awarded an order valued at approx ₹152 crore (inclusive of taxes) by the Ministry of Defence, Government of India, for the supply of its integrated air defence combat simulator (IADCS) for L70 Gun,” said Zen Tech in a regulatory filing to the stock exchanges. The order is to be executed within 18 months.

Zen Tech announced in its exchange filing that the IADCS is a cutting-edge virtual simulation system designed to provide comprehensive training for air defence operations. Developed through Zen's internal R&D efforts, the project “showcases the commitment to building proprietary technologies and intellectual property with strategic value to the armed forces.”

Also Read: Defence Ministry inks ₹6,900 crore contracts with Bharat forge, TATA for artillery gun systems, vehicles procurement

“This order is a testament to our unwavering belief in innovation and our ability to build world-class indigenous solutions for the defence forces,” said Arjun Dutt Atluri, Vice President of Zen Technologies, regarding the order win.

Atluri added, “We invested in the research and development of this simulator independently, convinced of its transformative potential. With its successful induction, we foresee significant interest from within India and from friendly foreign nations operating legacy air defence platforms like the L70 gun."

“This marks an important milestone in our journey to becoming a global leader in virtual defence training systems,” he said. The Zen IADCS enhances operator readiness and unit-level coordination through hyper-realistic virtual environments replicating real-world scenarios, reducing the need for costly, logistically complex live training exercises. The solution is scalable and adaptable, offering long-term operational and economic benefits.

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Zen Tech Share Price Brokerage View: Should you buy or sell?

On Friday, shares of Zensar Technologies opened at ₹1,482 and gained over four per cent to hit an intraday high of ₹1,529. The defence solutions major commands a market cap of ₹13,407.67 crore.

Zen Technologies Ltd is a pioneer and leader in world-class, state-of-the-art Defence Training and Anti-Drone solutions. It has a proven track record in building training systems for imparting defence training and measuring the combat readiness of security forces. Domestic brokerage Elara Securities had initiated coverage on Zen Technologies with a ‘buy’ rating.

"Zen Tech is the undisputed leader in land-based simulators with a 90 per cent share and is now foraying into naval simulators through new acquisitions. Zen is set to leverage in-house R&D and IP-led asset-light business model with high ROE, a large addressable market for core categories (simulators and anti-drones) and new segments (AI-led defence solutions), and value unlocking through new acquisitions," said the brokerage.

Domestic brokerage Motilal Oswal Financial Services highlighted that Zen’s remote-controlled weapon systems are the lightest in the market (at 42 kg) followed by a Turkish competitor, whose systems weigh around 70-75 kg.

Further, management stated that Zen is in talks with these OEMs and expects orders to start in FY26. Management is also looking for opportunities to organically cater to the Navy and Air Force segments via acquisitions.

Also Read: Zen Technologies share price hits 10% upper circuit, snaps 3-day losing streak

Valuation: Elara Securities gave a target price (TP) of ₹1,535 and eyes a potential upside of 29 per cent on Zen Tech stock. “We initiate coverage on Zen with a Buy and a TP of ₹1,535, based on 25x March FY27E P/E. The P/E is a 10 per cent discount to the private defence industry P/E of 27x.”

“Zen is trading at an attractive 21x one-year forward P/E, significantly lower than that for other private players, which presents a good entry point.”

Motilal Oswal retained its ‘buy’ rating on Zen Technologies. “We maintain our estimates and reiterate the BUY rating on Zen Tech with a revised TP of ₹2,400, based on 40x Dec’26E EPS,” said the brokerage on the stock.

Financial Outlook: Elara Securities expects an earnings CAGR of 60 per cent through FY24-27E and an average ROE and ROCE of 42 per cent through FY25E-27E. Motilala Oswal expects a CAGR of 67 per cent/63 per cent/65 per cent in revenue/EBITDA/PAT during FY24-27.

The growth will be led by a 31 per cent order inflow due to a strong pipeline across simulators and anti-drones, an EBITDA margin of 38 per cent for FY25, FY26, and FY27, and enhanced control over working capital due to improved collections.

Key risks and concerns: "Key risks to our call are delay in awarding of tenders and shift in defence budget allocation away from simulators," added Elara Securities. According to Motilal Oswal, Zen Tech is exposed to foreign currency risks for its export revenue.

Also Read: Defence stock Zen Technologies share price plunges over 17% after Q3 results

High working capital can also pose risks to cash flows, as historically, Zen Tech's working capital has remained high due to issues related to high debtors and high inventories. “This will likely come down due to improved collections and lower inventory, as per the management. However, any delays can affect cash flows for FY25/26,” added the brokerage.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.