Zen Technologies shares slump 9% in 2 days post Q1 results

Economic Times

4 days ago

Zen Technologies' shares declined following Q1 results, revealing a drop in order backlog and concerns about future growth. Despite management's optimism for increased order inflows and potential exports, brokerage firms have downgraded ratings due to anticipated earnings slowdown. While some maintain a 'Buy' rating citing strong fundamentals and growth potential, others adopt a more cautious 'Hold' stance amid order delays.
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Shares of Zen Technologies dropped nearly 9% over two days to Rs 1,603 on the BSE following the company's Q1 results , which showed muted performance and a slowdown in order inflows A report by Nuvama highlights that the consolidated order backlog has declined to Rs 7.54 billion (0.7x FY25 sales), down from Rs 11.6 billion in June 2024, raising concerns about future growth visibility. However, management remains optimistic about achieving Rs 6.5 billion in order inflows in Q2FY26, supported by potential US/NATO exports and India's defense emergency procurement orders throughout FY26.The brokerage firm has downgraded its buy rating to 'HOLD' as they find an approaching earnings trough with a recovery likely only from H2FY27E (if and when ordering picks up). 'We are cutting FY26E/27E EPS by 8%/19% and target PE to 40x (earlier 45x) with rollover to Sep-27E for a TP of Rs 1,800 (earlier Rs 2,170), " the report added.The consolidated revenue of Zen Technologies was reported at Rs 158.22, and the PAT was reported at Rs 47.75 crore.'Our Q1FY26 results reflect moderation in topline growth, we believe this is a temporary adjustment phase with a much stronger long-term growth trajectory. Despite this temporary moderation, our business fundamentals remain strong. We have successfully maintained our EBITDA and PAT margins, reflecting strong operational discipline and cost efficiency. Our consolidated order book stands at₹754 crores and maintains a debt-free balance sheet,' Ashok Atluri – Chairman and Managing Director, said in the filing with the exchange.Looking ahead to H1FY26, we remain confident in achieving our order inflow guidance of Rs 800 crores. Out of which we have secured orders amounting to ₹150 crores till date, with the remaining Rs 650 crores expected to materialize within the first half. In addition, we expect orders to be placed under the government's emergency procurement plan, particularly for anti-drone systems,' Atluri said.He further mentioned that, 'Our robust pipeline, combined with continued policy support for indigenous manufacturing, positions us well for sustained growth. While FY26 is likely to be a year of consolidation, we remain focused on executing our long-term strategy and are confident in maintaining our targeted cumulative revenue of Rs 6,000 crores over the next 3 financial years.'Elara Capital assigns a buy rating with a target price of Rs 2,225. The brokerage firm mentioned in its release that, 'We pare our TP to INR 2,225 on 40x (unchanged; in line with private defence companies) June FY27E P/E. However, we reiterate Buy given the growing demand for domestic defence as also ZEN's product portfolio along with increase in scope for exports, and robust performance by subsidiaries (on inflows and sales).''We reiterate Buy as successful demonstration of ZEN's equipment in the recent India-Pakistan conflict should drive demand on domestic and export fronts, along with robust performance by subsidiaries on the inflows and sales front. We expect an earnings CAGR of 26% in FY25-28E with an average ROE and ROCE of 19% each through FY26E-28E,' ICICI Securities further said.Another brokerage firm, ICICI Securities, downgraded the rating to hold from buy previously, with a target price of Rs 1,700. "Given the delays in ordering, we reduce our FY26/FY27 EPS estimates by 30%/22%. We downgrade the stock to HOLD, from Buy, with a revised target price of INR 1,700, based on 35x FY27E EPS,' it added in its release.