Zen Technologies : Sadhan Business Updates #q2fy24results #q2fy24earnings #multibaggerstocks
hi happy4 guidance is 450 to 500 CR 250 say 500 CR 2x this is just the transition year next year is the main thing next year it would be 900 this has proven itself for an investor to understand because until we understand the business we cannot hold it so let's start with the the first one the Zen one so Zen interesting the promoter said that the unless we absorve the technology actually this is a part of their strategy they have huge cash around more than 100 CR cash so next question was what they are going to do with the cash are they going to acquire something inorganic then he said that yes we are looking for some inorganic acquisition but unlike others just to gain scale just to gain Market size the purpose of many Acquisitions are just to gain just to expand yourself but that's not their their acquisition philosophy is very clear which I like and that unless we absorb the technology and build the next generation of product so next generation of product it's not that I'm interested in a so I acquired a if I'm interested in a and I can see that from a I can get to their offspring which is their next Generation B let's say so they are not just focusing on expanding the market and spending money on that they are focusing on next platform of Technology next in Ovation so they are focusing on Innovation Downstream not K market so which is their core that's why I like Zen they are poorely a pure play R&D bet and their R&D bet has been successful and that's why this has become so much cheris stock in the market this statement can come only from a person who is deep into R&D he saying that we are not going to acquire any company just to manufacture it for somebody so I said that Holy Grail of inorganic growth is reproduction not just production so this is the focus of genen technology which I like but let's come back to the numbers and hard numbers were very good like uh 2x growth in quarterly Consolidated numbers Consolidated Top Line has become 2x their Abida have almost nearly become 2x almost less than 2X P around 2.7x so this is operating leverage basically uh 2xi less than 2x operating 1.8 1.8 yeah 2.7x which is the do I was talking about this is the degree of operating leverage I voiced out in the videos that even the operating profit uh aidda has grown by 80% but this has become 170% which is exactly 2x this is the thing I want everybody to have his heads on sometime what will happen that this is 100% that this will become 150% someday not ab ab 150% or 180% growth in operating profit we'll see if we see a doubling of Top Line this this some quarter it will come eventually I'm just predicting it because I I understand the madness behind it the method of the madness is that that this Lage will go to 2x from uh Top Line to operating profit and 2x from operating profit to profit so this 2x we can clearly say this 2x will come in future I don't know when but it will definitely come order book update that is very critical uh they have a order book of around, 1400 CR say product ke value product equipment they Supply that is 827 so actually I'll go back to the complete order book later but key update in order book in Quarter Two S quarter two 90 days may they have received 923 cres 10 CR order per day speed say they have grown break up product value was 800 out of 900 800 per 96 CR which is uh going by the same logic 10 12% which is not everything is logical nothing illogical Happening Here in zenic I mean who are the contributor to this order so we'll notice that it is not anti drone orders so Market is rating it as a entry drone system and all a entry drone order sub training equipment simulator training simulator actually order ENT which is 150 more so roughly 300 ADC 300 is anti drone system ads and rest five five 500 odd is basically training equipment combin ads I don't know the break up of it so definitely it is 300 plus so roughly 400 400 ad and 400 simulator so largely simulator ERS simulator order this company is doing well in simor would grow up but why simulator have certainly caught the mainstream it is a result of something happened in the war so that IND indigenous is a thing which was already there it is not something new which is a policy level but Ukraine war what happened that Ukraine was supplied by EUR European Union NATO everybody supplied their tanks and all so they given this donation or tanks and all but Russian drones and Russian missiles and Russian army prepared Army so they were in front of a prepared Army and with this uned equipments defe because I don't know how to operate this so same thing happened with Russia Ukraine so Ukraine with all costly so-called Western Equipment was not able to compete with Russian people realiz if you don't know how to operate them that's why everybody have self introspected even particularly India forbid whether are we ready then they perhaps realize that they are not ready real training such simulator training that's why they have ordered this all orders in August August September to this company although amount is small because training software business basically this is a software bus so order 160 150y but I was very puzzled training emergency I mean this was actually my brain twister for some time but now I realize when when the commentary came fromen actually this is the real Fear Factor training was put on the pedestal with fifth gear that's why this training equipment order came to Zen like like breeze to them or emergency procurement so defense degree LA but emergency they give emergency procurement has a limitation that you cannot order Beyond 300 CR Mahindra they will not benefit from this emergency pedestal push but companies like Zen so being small is a super power here being small and efficient but that's why you will notice that I have been looking for micro cap stocks because they are small and efficient investing is a long game long game so this membership is available at less than 13,000 for a 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year then this is a program for you and this is not a stock recommendation service this is an educational platform so you have to pick up your winners according to you I'm not going to advise I just talk about why I bought those certain stocks and why I sold those stocks this membership gives you an access to my thinking process my investing process and if you really want to learn that process then you are most welcome under this membership so do Avail this discount a question if we if they have secured our 900 crores order book in the last 6 months considering that Top Line is in the range of 250 crores 300 crores so three year order book doesn't it put pressure on the company to grow size of order book company fa longm what is your view on that point so bus model important on this they are not a manufacturer they never say they are manufacturer software business at core it is a software business simulator training even entry drone system sofware Hardware Hardware the hardware portion in both the business model is mostly outsourced because they they are located in Hyderabad and they they are in this business since last 20 30 years so they have their vendor base fully developed they are working on a job basis and all so they are not charging them huge money and they have done invested into so employe manfacturing manfacturing is outsourc but margins are very high because because the pricing is not done basis on marging it's not Cost Plus pricing so so that's the beauty of it so they will be so talking about your 3x while question so they were ready for this for long time I mean manage of they had that Top Line of 60 70 CR I mean I invested thing is that they have been doing it for a long time I mean last 10 years say if you go through their record so they were ready for it manufacturing they are able to do it supply chain could be a problem but they have bought inventories of all those Electronics equipment we are hoping they they are manag they will be able to manage the supply chain basically supply chain risk is there because it's outsourced so fy4 guidance is 450 to 500 CR 250 say 500 CR 2x this is just the transition year next year is the main thing next year may next year it would be 900 1200 total order book 1400 order book around 1150 12200 CR is equipment order or 250 CR is asset management contract AMC so roughly fy5 this company would be having a 900 CR Top Line so which would be exactly 3x kind of of FY 23 number so that is the growth and simulator R 650 CR order book and anti drone system is 5 de so simulator is the basically is the thing which have pushed them anti drone pric but simulator has kind of beaten my estimate also so this company is doing wonders the company expects sustainable growth in f26 potentially reaching 1500 CR in Revenue going forward for 26 May 1500 Target Target this is not their guidance since they have to reach first 900 they are saying that after one two years we don't know that simulator have a better margin profile so that is also like actually we are seeing a company at one of the peak margin actual margin numbers more than 40 40% but guid 35% gross yeah Aida margin ke 35% Aida margin gross margin 65 70% they are saying they are confident that 35% over longterm they'll be able to maintain they saying that order flow to improve dramatically picture bidding for something like 500 to 600 of order in2 itself I mean I don't know 30% strike rate we have to watch out for order book again so planted Machinery capex is going to be very minimal because as I said it's mostly outsourc about the granularity of the order to export order export Market order 340 which is significant 30% Advance they have received so this is saving me the trouble of working capital days okay working capital days improved from 225 days a year ago to 125 days so this is thank to this export order which is positive because if you check working capital but they are operating PTC has better like 200 days but uh this this this guy is 125 super efficient export mix they have guided initially actually this is where they have not meet the guidance they will go for around 40% of export in FY 24 itself but 30% FY 24 export guidance is 50% so they have extended it to one year 50% export so export obviously you require good support government supp because IND based defense companies demand that is very clearly evident C countries Armenia is a for them Armenia they have set out an office Armenia is the same country anti drone system Armenia is a small company but aaban was a big one Armenia killed them by drone so that's why entry drone become a thing so somehow they have put up a shop itself because they want to CER to this Russia region CIS countries because actually if you go one level deep Armenia was part of CIS I mean USSR USSR USSR was broken down then Russia has given a kind of agreement has entered an agreement with Armenia and likes of this though Armenia has this comfort from Russia that if anybody attacks on you I will support you anybody whoever attacks on Armenia is moral duty of Russia to support them but these guys this war when this war happened then Russia was not at all came out they did not help Armenia so Armenia has to help them themselves with using drone they they won this aan war but CIS countries would feel security laps Russia has given them softare guarante but countries are actually in need of Indian supplies that's why potentially but this is my hypothesis it's not anywhere I'm not read anywhere but I think I'm just connecting the dots key CIS countries has a deficit of uh Security Services power Securities assets equipments and services that's why potentially they would have focused on CIS countries Middle East May Focus Sai Middle East and CIS and all these are their export areas so they are evaluating an organic acquisition opportunity in the field of simulation and electronic warfare again that is evident so this is about all about Zen Technologies 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2023-11-17 07:46
