Add Zen Technologies stock for long term multibagger gains

Unmanned Aircraft Systems, also referred to as drones, are aircraft without any human pilot and are widely used in sectors such as film making, defence and military, law enforcement, transportation, agriculture, surveillance and by e-commerce companies, including online food aggregators. The foundation was laid in 2021 when the New Drone Rules were announced by the government and subsequently the PLI scheme for making drones was formalised. In 2018, Zomato used a radical new concept to deliver food via drones, implying the significant role of logistics in the future of the food supply chain. More and more sectors have started the optimum use of drones such as the mining industry, oil exploration companies, agriculture companies, telecom tower companies, etc.
While traditional methods are quite time intensive and prone to human error, utilising drones results in considerable cost and time saving. Therefore, large Indian companies and innumerable start-ups are currently involved in developing and investing in the drone ecosystem. This is accelerating and propelling the entire drone ecosystem of maintaining, repair, training and education applications. The EY FICCI report of 2022 said that the drone industry can make India the Drone hub of the world and strengthen the manufacturing potential to around US$ 23 billion by the year 2030, thereby offering most competitive and innovative manufacturing facilities. Analysts tracking the drone sector and the listed companies in this particular industry are Info Edge, Dcm Shriram Industries, Paras Defence, RattanIndia, Zen Technologies, etc. Here again, sector specialists are closely watching the oldest company of the block, Zen Technologies as a good bet in the long term future shape of things.
The company was formed in 1993 and is in the business of designing, developing and manufacturing combat training systems and solutions for the defence and security sector worldwide. Headquartered in Hyderabad, it also offers anti-drone solutions through innovative and cost effective solutions. The company’s business model is split in three verticals, first being the annual maintenance contract providing a recurring revenue stream of exceptional profitability margins.
The second business vertical of Zen Technologies is the Counter Drone solutions providing anti drone systems for detecting or intercepting unwanted and unmanned aerial vehicles and drones. The third business vertical of the company is the combat training centres providing defence training solutions and platform of realistic battle experiences. The company has bagged multiple orders for manufacturing and defence technologies and hence all business verticals are showing visible growth. The company is confident of higher revenue and margins in the near future. Zen Technologies posted superb financial numbers for Q3FY23 with net sales at Rs 52 crore, up 100% from Rs 26 crore as of December 2021. The quarterly net profit rose by 800% to Rs 9.44 crore in December 2022 as against Rs 1.31 crore in December 2021 quarter. Analysts tracking the industry particularly the defence sector are quite bullish on Zen Technologies stock to perform quite well over the next few years on the back of higher revenue and profits. The stock can be a multibagger over a next couple of years’ perspective and can be added in any investment portfolio at the current market price of Rs 265 for long term gains.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.