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Record Execution; Stronger Order Visibility Supports Growth Outlook

ZEN Technologies (ZEN) delivered its highest-ever quarterly revenue of INR 3,451 Mn, up 98.8% YoY, with operational EBITDA/PAT growing strongly. EBITDA margin stood at 38.2%, broadly in line with guidance of mid-30s. More importantly, the company secured order inflows of INR 4,820 Mn during the quarter, taking the consolidated order book to INR 1,3760 Mn (2.0x of FY26 revenue). We believe the improvement in execution, coupled with a growing order book, provides a strong revenue base for H2FY27.

We expect the CUAS segment remains a key medium-term growth driver, with procurement progressing through the Fast Track route. FTP-related RFPs could begin in the coming weeks, with initial awards likely in Q4FY27, although delays may extend into FY28. ZEN's indigenous CUAS capabilities across radars, detection systems, jammers and command-and-control position it favourably. Additionally, INR 400 Cr of simulator opportunities and its expanding naval simulation portfolio offer further order and export potential. We expect conversion of these opportunities to strengthen order-book visibility and support growth.

View & Outlook:

We expect continued investments in R&D, alongside the integration of AI-led command-and-control capabilities, to strengthen ZEN's technology portfolio and expand its TAM. While order finalisation timelines remain inherently uncertain, we maintain a constructive view on the company's mediumterm growth prospects. We have revised our FY27E and FY28E financial estimates to reflect the improved revenue trajectory. We now estimate Revenue/EBITDA/PAT to expand at a CAGR of 52.3%/51.0%/41.2%, respectively.

Considering the company's medium-term growth potential and expanding tech portfolio, we have increased our target valuation multiple to 35x (from 30x). Accordingly, we upgrade our rating to BUY (from ADD) and raise our Target Price to INR 2,150 (earlier INR 1,850), valuing the stock at 35x the avg. FY28–29E EPS.

Revenue and Earnings Surge on Strong Execution

* Revenue for Q2FY27 was up 98.8% YoY and 143.7% QoQ at INR 3,451 Mn (vs CIE est. of INR 2,256 Mn)

* EBIDTA for Q2FY27 was up 103.9% YoY and 240.9% QoQ at INR 1,320 Mn (vs CIE est. of INR 767 Mn). EBITDA margin stood at 38.2%, expanded by 94 bps YoY and 1,090 bps QoQ (vs CIE est. of 34.0%)

* RPAT for Q2FY27 was up 64.6% YoY and 219.9 QoQ at INR 1,019 Mn (vs CIE est. of INR 640 Mn). RPAT margin contracted by 614 bps YoY, reaching 29.5% (vs CIE est. of 28.4%)

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