Defence stock in focus after receiving ₹120 Cr contract to set up India’s first Combat Training Node

Synopsis::
Zen Technologies has recently bagged a 120 Crore defence contract with the Indian Ministry of Defence to set up India’s first Combat Training Node (CTN) at the Infantry School in Mhow, Madhya Pradesh. 

The shares of this defence company engaged in designing, developing and manufacturing combat training solutions and anti-drone solutions for defence and security forces such as the Ministry of Defence, police and paramilitary forces, government departments and private enterprises. 

With the market capitalization of Rs.12,374 Crores, the shares of Zen Technologies is trading at around Rs. 1,370 which is ~48 percent less from its 52 week high of Rs. 2,627. It is trading at a P/E of 50 whereas the industry P/E stands at 62.

What is the the news

Zen technologies has recently been awarded a major contract from the Ministry of Defence, Government of India of worth Rs. 120 to set up India’s first Combat Training Node (CTN), at the Infantry School located in Mhow, Madhya Pradesh.

The Combat Training Node is said to comprise of 60-plus simulators and solutions designed for weapons training, drone drills, and target systems for live firing ranges. The company will be designing Live-Virtual-Constructive (LVC) training and live firing range solutions to deliver realistic combat training at CTN. With the advanced AAR and analytics, the CTN will complement training by accelerating readiness with reduced training cost. 

Company Overview and Financial Highlights

Zen Technologies is one of the leading defence companies in India, which is indulged in designing, developing and manufacturing combat training solutions and anti-drone solutions for the Ministry of Defence, police and parliamentary forces, government departments, and private players whose 90 percent of the revenue has been generated from repeat customers. The company’s headquarters is located in Hyderabad, India and with offices in UAE and the USA.

82 percent of the order book is contributed from the domestic markets and export markets contribute ~18 percent. The company has recently completed four strategic acquisitions,

1. Applied Research International Private Limited
2. Vector Technics Private Limited
3. Bhairav Robotics Private Limited
4. TISA Aerospace Private Limited

These acquisitions will help Zen to expand its footprint into the naval &  maritime simulation sector and enable the company’s entry into the drone ecosystem with aerospace-grade. The strategic acquisition will fasten their entry into defence robotics and Its early R&D lead helps shorten the product launch timeline by 18–24 months.

Year-on -Year analysis: Zen Technologies revenue has reduced from Rs. 242 Crores to Rs. 174 Crores down ~28 percent, operating profit decreased by ~19 percent from Rs. 80 Crores to Rs. 65 Crores and Net profit decreased by ~1.5 percent from Rs. 63 Crores to 62 Crores.

Quarter-on Quarter analysis: Zen Technologies Revenue has increased on a quarterly basis from Rs. 158 Crores to Rs. 174 Crores, up 10 percent, operating profit has increased negligibly by 1.5 percent from Rs. 64 Crores to to 65 Crores. Net-profit has increased by ~17 percent from Rs. 53 Crores to Rs. 62 Crores.  

Written by- Vachan Kadli 

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