Posted on February 19, 2025, by Niftynews
Zen Technologies stock surged 10% on February 19, 2025, closing at ₹1,069 per share. This surge marks the end of a three-day losing streak, during which the stock had lost significant ground. The price jump is a significant relief for investors, as it follows a period of heavy selling pressure, which saw the stock plummet by over 30%. Despite this recent volatility, Zen Technologies has been a standout performer in the market, particularly over the past two years.
A Welcome Rebound After a Three-Day Decline
The 10% surge in Zen Technologies share price is particularly notable as it follows a troubling three-day stretch, where the stock had dropped by 33%. This decline came after investor sentiment soured, following the release of the company’s Q3FY25 results. In addition to disappointing earnings, many analysts downgraded their target prices for the stock, adding to the pressure on its market performance.
However, today’s rally signals a potential recovery for Zen Technologies, with its shares bouncing back from a sharp correction. The stock’s performance has remained robust over the long term, despite the recent dip, and many investors continue to view it as a promising investment in the defense technology space.
Q3FY25 Results: Growth in Revenue But Declining Margins
In its Q3FY25 earnings report, Zen Technologies posted a 53% year-on-year (YoY) growth in revenue, which totaled ₹152.21 crore. This growth, however, was overshadowed by a decline in the company’s margins. EBITDA increased to ₹66.24 crore, but the company saw its EBITDA margins dip to 38% from 45% due to rising operating expenses. Similarly, while net profit grew by 30% YoY to ₹39.72 crore, the company’s profit margins fell to 22% from 29%.
This slowdown in profitability raised concerns among investors, as many were expecting stronger performance. Additionally, Zen Technologies saw a reduction in its order book, which fell from ₹956 crore to ₹816 crore. The company secured ₹1.69 crore in new AMC orders but did not receive any new equipment orders in the quarter. This further fueled concerns about the company’s short-term outlook, contributing to the recent selling pressure on the stock.
Zen Technologies Stock Faces Major Correction But Remains Strong Long-Term
Despite the sharp 60% correction in the stock price in the past two months, from ₹2,445 per share to ₹1,069, Zen Technologies long-term growth story remains compelling. Even after the significant recent drop, the stock is still up 315% over the last two years and an astonishing 1,700% over the last five years. This performance showcases the company’s ability to deliver impressive returns over the long term, even during periods of short-term volatility.
Zen Technologies share price is a reflection of both its sectoral growth and the broader market conditions. As a defense technology company, it stands to benefit from increasing government and private sector spending on defense and security, offering investors an opportunity to gain exposure to this growing market.
Management Maintains FY25 Revenue Guidance
Zen Technologies’ management remains optimistic about the company’s growth prospects. During the Q3FY25 earnings call, the management reaffirmed its FY25 revenue guidance, projecting ₹9 billion in revenue, an EBITDA margin of 35%, and a PAT margin of 25%. The company acknowledged delays in some orders but remains confident in securing ₹8 billion worth of domestic orders by Q4FY25 and H1FY26, excluding export orders. This guidance demonstrates Zen Technologies’ commitment to maintaining strong growth despite short-term challenges.
Additionally, Zen Technologies has set an ambitious target of a 50% compound annual growth rate (CAGR) in revenue from FY26–28, which would significantly bolster the company’s long-term growth trajectory.
ICICI Securities Reaffirms Buying Opportunity
ICICI Securities, a prominent brokerage firm, has maintained its ‘Buy’ rating for Zen Technologies, despite lowering its target price from ₹2,535 to ₹1,970 per share. The firm sees the sharp correction in the stock price as a buying opportunity, arguing that the fundamentals of the company remain strong. ICICI Securities attributes the recent decline primarily to market-driven factors, such as uncertainty around order inflows, rather than any structural issues within the company.
Conclusion: Is Zen Technologies Still a Strong Investment?
Zen Technologies stock has proven resilient over the long term, and despite its recent volatility, many analysts view the company’s growth prospects as positive. With a solid revenue growth outlook, strong industry fundamentals, and a 50% CAGR target for the next few years, Zen Technologies remains an attractive investment opportunity in the defense sector. However, potential investors should weigh the risks associated with the stock’s short-term volatility against its long-term potential for growth.
