Shares of Zen Technologies, a drone equipment manufacturer, have been sliding steadily in recent months without any signs of a pullback, as investor sentiment towards the counter remains weak amid the company’s poor performance in recent quarters, driven by a slowdown in order inflows, making a once high-flying stock struggle to regain momentum.
Over the last three months, the shares have lost 25% of their value to ₹1,420, including a sharp 26% decline in July, while the weak trend has persisted in August so far. The latest fall has dragged the stock down 47% from its recent peak of ₹2,627 apiece, making it one of the worst performers in the defence sector in 2025.
The weak performance has also prompted domestic mutual funds to trim their holdings in the June quarter by nearly 1%. Fifteen mutual funds collectively own a 6.77% stake in the company, down from 7.70% in the preceding March quarter.
Order pipeline thins
Order inflows for the drone maker have slowed over the past 15 months, reducing its consolidated order backlog to ₹7.54 billion at the end of the June quarter (0.7x FY25 sales), down from ₹11.6 billion in June 2024 quarter, which raised concerns among investors about the company’s future growth visibility.
Within the company’s standalone order book, ₹2.6 billion was attributed to AMC and the remaining ₹3.5 billion represented equipment orders, which included both simulators and anti-drone systems (ADS). Specifically, simulator orders were valued at ₹2.8 billion and anti-drone systems at ₹640 million.
Despite the slowdown, the company remains optimistic about achieving order inflows worth (simulator order) ₹6.5 billion in the ongoing quarter, which could materially improve execution visibility in 2HFY26.
However, analysts believe that the moderation in order inflows reflects only a temporary delay in standard procurement activity, as the government remains focused on emergency purchases after Operation Sindoor.
For the June quarter, the company reported results below consensus estimates, missing on both revenue and net profit. Revenue declined 56% YoY to ₹1.1 billion due to design modifications in a major equipment order, which resulted in a deferment of ₹500–700 million in revenue.
Analysts see long-term potential but urge near-term caution
Analysts remain constructive on Zen Technologies’ long-term positioning in high-impact defence domains but cautioned that the near-term weakness in order momentum and execution warrants a wait-and-watch approach, with fresh inflow announcements over the next couple of quarters being key for greater earnings visibility.
Following the June quarter numbers, Motilal Oswal trimmed its estimates for FY26 and FY27 by 22% and 18%, respectively, to account for the temporary slowdown in near-term execution, resulting in a drop in the stock’s target price to ₹1650 from ₹1850 earlier.
Any prolonged weakness in defence procurement, particularly for simulators, could expose the company to further risks of reduced inflows and slower growth, the brokerage warned.
ICICI Securities also slashed its target price on the stock to ₹1700 apiece and also lowered the rating to ‘Hold’ from the earlier ‘Buy.’ Zen’s recent acquisitions are likely to remain margin accretive and improve its product offerings. That said, we believe order accretion shall be closely monitored by Street, the brokerage said.
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