Zen Technologies Stock Downgraded by Motilal Oswal Amid Valuation Worries

Zen Technologies, the multibagger defence stock, is now drawing investor concerns over its steep valuations. Brokerage firm Motilal Oswal has downgraded the stock to 'neutral' from 'Buy' on Monday. While the defence stock reported better-than-expected Q4 numbers, analysts believe the stock is better bought at a more reasonable price.

The company reported a triple-digit year-on-year (YoY) rise in net profit figure to Rs 101 crore, as against Rs 34 crore recorded in the corresponding quarter of the previous fiscal year. Revenue from operations also surged to Rs 324 crore from Rs 141 crore reported in Q4FY24.

On an annual basis, the shares of Zen Technologies have surged over 98% on the National Stock Exchange. In the last single month period alone, the stock has soared over 30.2% on the exchanges.

"While we remain positive on the company and its ability to capitalise on upcoming demand for simulators and anti-drones, our estimates and current valuations capture the positives related to upcoming orders and correspondingly a 40% PAT CAGR over FY25-27," Motilal Oswal said in its report.  

"The stock has moved up by 74% since our last update in Feb’25. We thus downgrade the stock to Neutral from BUY and would look for better price points to enter the stock," the brokerage firm added.

Major defence stocks have gained heightened investor attention during the past few weeks owing to border tensions and broader geopolitical concerns. In the last 1 month, the Nifty India Defence index has surged by more than 22% as against the benchmark NSE Nifty50, which has witnessed a single-digit rise of over 3%.

Order Book Remains Strong

Zen Technologies' order pipeline remains strong with its standalone order book at Rs 6.9 billion as of March'25 (an additional Rs 1 billion from subsidiaries). However, analysts point out that these orders might experience slower execution.

"The order pipeline has grown significantly due to increased government urgency following recent border incidents and geopolitical tensions. However, the finalization of these tenders may happen after 1HFY26," the brokerage firm said.

Exports are also a key pipeline focus, especially for simulators and anti-drone solutions, and Zen expects inflows to materialise from the US by FY27, the report added.