Zen Technologies Ltd., a rapidly emerging company in India's defense sector, has significantly impressed investors, delivering approximately 980% returns over the past three years.
Zen Technologies Ltd: Zen Technologies Ltd. is one of the fastest-growing companies in India's defense sector, having delivered substantial returns to investors in recent years. A nearly 980% increase in three years, a 402% rise in two years, and a doubling of the share price in the last three months establishes this company as a multi-bagger stock.
Recent Market Dip and its Cause
However, Zen Technologies' shares experienced a nearly 5% drop on Friday, hitting the lower circuit. This decline was primarily attributed to profit-booking, with numerous investors selling their shares to realize profits. Consequently, the stock's one-month gain reduced from 60% to approximately 53.5%.
By Thursday, the stock had doubled in the preceding three months, and on Friday's session, it showed a return of approximately 76%. On the BSE, the share price fell from ₹2193.50 to ₹2083.85. The company's market capitalization also decreased to approximately ₹18,815 crore.
Technical Analysis and Expert Opinion
The company's Relative Strength Index (RSI) is around 79.8, indicating an overbought condition. This suggests the stock is currently technically overvalued, making a slight price correction normal. Ravi Singh of Religare Broking believes that buying during this dip presents a good opportunity.
He suggests that buying the stock at the ₹1,950 to ₹2,000 level would be advantageous, potentially leading to a price increase to ₹2,300 to ₹2,500. A stop-loss at ₹1,800 is recommended to mitigate risk. Mandar Bhojane of Choice Broking also considers the stock technically b but advises waiting due to the overbought situation.
Existing investors could book partial profits and set a stop-loss at ₹2,000. Resistance levels are anticipated at ₹2,400 and ₹2,600.
Improved Financial Performance
Zen Technologies demonstrated significant improvement in its Q4 financial performance:
- Profit: Increased by 189% to ₹101 crore (from ₹34.94 crore last year)
- Revenue: Increased by 129.8% to ₹324.97 crore (from ₹141.39 crore last year)
- EBITDA: ₹162.74 crore, compared to ₹53.08 crore last year. EBITDA margin increased to 50.08% (from 37.54% last year).
- EBITDA indicates the profit before interest, taxes, depreciation, and amortization, reflecting the company's operational efficiency.
Zen Technologies' Business and Products
Zen Technologies is a leading company in the design and manufacture of defense training systems. Its primary product line includes:
- Land-based military training simulators
- Driving simulators
- Live range equipment
- Anti-drone system (ZADS)
The company's anti-drone system detects, classifies, and tracks drones, mitigating potential threats by jamming drone communication. It also operates a training platform in Hyderabad, enhancing training for defense forces.
Outlook
Patience is advised for investors as the stock is currently overbought.
- Technical analysis suggests buying on dips, particularly around the ₹1,950-₹2,000 level.
- Given the company's b financial performance and the growing demand in the defense sector, this stock holds potential for long-term returns.
- New defense policies and the government's increased investment plans in the defense sector are positive indicators for stocks like Zen Technologies.
Investor Actions
Existing investors may consider booking partial profits and setting a stop-loss at ₹2,000.
- New investors can consider buying on dips around ₹1,950-₹2,000.
- Maintain a stop-loss of ₹1,800 for risk management.
- Consider both technical and fundamental aspects before investing.
