Zen Technologies Slumps 20% Despite YoY Profit Growth in Q3

Zen Technologies shares hit the 20% lower circuit at Rs 1,080 on February 17 after the company disclosed its Q3 financial results. While the drone manufacturer’s year-on-year (YoY) growth was evident, a decline was observed compared to the previous quarter.

Q3 Financial Performance

The company reported a net profit of Rs 38.62 crore, marking a 22% rise from Rs 31.67 crore in the same quarter last year. This growth was primarily driven by higher other income.

However, sequentially, net profit nearly halved from Rs 65.24 crore in the preceding quarter.

Similarly, revenue followed the same trend. On a YoY basis, revenue surged 44% to Rs 141.52 crore from Rs 98.08 crore. However, in comparison to the Rs 241.69 crore recorded in Q2, revenue declined by 41%, highlighting a notable sequential slowdown.

EBITDA Margins and Company Outlook

EBITDA margins displayed a contrasting pattern. They weakened to 35.90% from 47.34% in the same quarter last year but improved from 35.12% recorded in the previous quarter.

“In this quarter, we experienced a rise in profitability due to higher other income; however, we remain confident that we will achieve our EBITDA target of 35% and PAT margins of 25% by the end of the financial year,” said Ashok Atluri, Chairman and Managing Director of Zen Technologies in an exchange filing.

As of December 2024, the company’s order book remained robust at Rs 816.91 crore, reinforcing management’s confidence in a strong pipeline for the upcoming quarters.

Stock Market Reaction and Strategic Investments

On February 15, Zen Technologies executed strategic investments in multiple companies. The board of directors approved acquisitions, including a 100% stake in Applied Research International Private Limited and ARI Labs Private Limited in various tranches.

Additionally, the company acquired a 45.33% stake in Bhairav Robotics Private Limited and a 51% stake in Vector Technics Private Limited.

Following the announcement of Q3 results, Zen Technologies’ share price fell more than 17% in early trade on February 17. The stock dropped by 17.62% to Rs 1,111.30 per share on the BSE.

Quarterly Profit and Revenue Trends

Zen Technologies’ Q3 FY25 net profit stood at Rs 38.62 crore, registering a 22% YoY increase from Rs 31.67 crore, driven by higher other income. However, on a sequential basis, net profit fell 40.8% from Rs 65.24 crore in the preceding quarter.

Revenue from operations increased 44% YoY to Rs 141.52 crore from Rs 98.08 crore. However, revenue dropped 41.44% sequentially from Rs 241.69 crore in Q2 FY25.

At the operational level, EBITDA rose 21% YoY to Rs 58.69 crore from Rs 48.41 crore. On a quarterly basis, EBITDA declined 33.18% from Rs 87.84 crore.

EBITDA margins fell to 35.90% from 47.34% YoY but improved from 35.12% in the previous quarter.

Strategic Acquisitions and Business Expansion

Zen Technologies has made significant acquisitions to strengthen its capabilities.

The company announced investments in Vector Technics Private Ltd and Bhairav Robotics Private Ltd, aiming to enhance expertise in UAV propulsion, autonomous robotics, and aerospace components.

According to Zen Technologies, these acquisitions are expected to drive self-reliance in defense manufacturing and position the company for global competition in high-tech defense solutions.

Zen Technologies acquired a 51% controlling stake in Vector Technics, which specializes in propulsion and power distribution solutions for drones and UAVs.

This move enables Zen to expand its footprint in aerospace components and reinforce its role in the global drone and robotics industry.

Additionally, the company secured a 45.33% stake in Bhairav Robotics, further strengthening its presence in the defense robotics and autonomous systems market.

Bhairav Robotics specializes in advanced robotic products such as quadrupedal robots and autonomous weapon systems.

Stock Market Trends and Technical Analysis

At 9:20 AM on February 17, Zen Technologies’ shares were trading 13.68% lower at Rs 1,164.60 per share on the BSE. The stock continued its decline, hitting the 20% lower circuit at Rs 1,079.35 against the previous close of Rs 1,349.15.

A total of 1 lakh shares were traded, resulting in a turnover of Rs 11.10 crore. The company’s market capitalization fell to Rs 9,745 crore on the BSE.

However, despite the recent drop, the stock has delivered exceptional returns over the years. It has gained 357% in two years and surged by 1,841% over the past five years.

Financial Performance and Technical Indicators

Zen Technologies posted a 30% rise in net profit for the quarter ending December 2024, reporting Rs 39.72 crore in Q3, compared to Rs 30.58 crore in the December 2023 quarter. However, profit declined 36.6% sequentially from Rs 62.67 crore in Q2 FY25.

Revenue grew 53% YoY to Rs 152.21 crore in Q3, up from Rs 99.52 crore a year ago, but dropped 37.1% from Rs 241.84 crore sequentially.

EBITDA increased 42% YoY to Rs 66.24 crore in Q3 from Rs 46.73 crore in the previous year’s quarter, though it stood at Rs 88.48 crore in Q2 FY25.

Despite EBITDA margin slipping to 38.01% from 45.04% YoY, the company remains confident in meeting its financial targets.

Zen Technologies shares hit a 52-week low of Rs 795.10 on February 16, 2024, and reached a 52-week high of Rs 2,627.95 on December 24, 2024.

The stock’s relative strength index (RSI) stands at 23.9, indicating oversold conditions. Additionally, it trades below the 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day moving averages.

As of December 31, 2024, Zen Technologies’ order book stood strong at Rs 816.91 crore, reinforcing its potential for continued growth in the defense sector.