ZENTEC

: Strong Order Book, High Margins, and Expanding Defence Portfolio

has emerged as one of India’s most strategically positioned defence-tech companies, leveraging early-mover advantage in combat simulators and counter‑drone systems. With a strong order book, expanding product portfolio, and a capital‑light manufacturing model, the company is well placed to benefit from rising domestic and global defence spending. Management expects FY27–28 to be strong growth years, supported by a robust pipeline in both simulators and CUAS. Zen deliberately entered uncontested niches—first advanced simulators, then anti‑drone systems (well before the market pivoted in 2018). Its flagship ZADS platform offers both soft‑kill and hard‑kill capabilities, positioning Zen at the forefront of modern battlefield requirements. With over 200 patent filings (88 granted), Zen’s competitive edge is deeply IP‑driven. More than 85% of manufacturing is outsourced to a Hyderabad vendor ecosystem, keeping fixed assets at just 10% of the balance sheet and enabling 39% EBITDA margins—among the highest in Indian defence manufacturing. India’s 15,000‑km border may require ~1,250 anti‑drone systems, representing a ₹10,000‑crore opportunity. Simulators also offer recurring, multi‑year demand due to global rearmament cycles, equipment replacement, and continuous training needs. Current order book: ₹956 crore (56% simulators, 44% drones), nearly 1x annual revenue. Despite FY25 order softness due to tender delays, Zen expects a sharp pickup in FY27–28. Additional ₹600–650 crore in simulator and emergency procurement orders are expected before March 2026. Zen has acquired stakes in Vector Technics, TISA Aerospace, Bhairav Robotics, Unistring, Ai Turing, and ARI—expanding into loitering munitions, precision weaponry, robotics, EW, and naval simulations. Exports form 15% of the order book and are scaling across Africa, Middle East, and CIS. At 25.9x FY28E earnings, the stock appears reasonable given high visibility, strong margins, and defence tailwinds.