Broker’s call: Zen Tech (Buy)

Target: ₹2,400

CMP: ₹2,088.60

Our recent interactions with Zen management indicate that ordering in key areas of Zen will start ramping up in the coming months. The company is also close to finalising the plans for an inorganic acquisition for simulator or anti-drone business and is looking at the US as one of the key markets in the future.

Recently, Zen has signed an MoU with AVT Simulation, which is into air simulation systems, and Zen intends to complement its ground simulation system portfolio through this MoU. Zen also expects improved traction in its recently launched products on remote-controlled weapon and battle surveillance systems.

We maintain our estimates and roll forward to December 2026 earnings and arrive at a revised TP of ₹2,400 based on 40x two-year forward earnings. Zen has the advantage of a faster CAGR in revenue and PAT, stronger margins and reasonable NWC.

Any slowdown in procurement from the defence industry, especially for simulators, can expose the company to the risk of reduced order inflows and hinder its growth. Zen is also exposed to foreign currency risks for its export revenue. High working capital can also pose risks to cash flows, as historically, ZEN’s working capital has remained high due to issues related to high debtors and high inventories