Zen Technologies Limited has informed the Exchange about Investor Presentation
Date: 31st July 2022
To BSE Limited Phiroze Jeejeebhoy Towers Dalal Street Mumbai- 400001 Through: BSE Listing Centre Security Code: 533339
Dear Sir/Madam,
To National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051 Through: NEAPS Symbol/Security ID: ZENTEC
Sub: Earnings Presentation Q1FY 2023
Please find attached earnings presentation for the quarter ended 30th June 2022.
The above https://www.zentechnologies.com/calls-and-conferences.
is also available on
information
the website of
the Company:
This is for your kind information and records.
Thanking You.
Yours sincerely, For Zen Technologies Limited
Hansraj Singh Rajput Company Secretary & Compliance Officer M. No. F11438
HANSRAJ SINGHDigitally signed by HANSRAJ SINGH Date: 2022.07.31 13:30:09 +05'30' Zen Technologies Limited Earnings Presentation Q1FY23 India’s leading defence training solution provider
NSE: ZENTEC BSE: ZENTEC - 533339 BLOOMBERG: ZEN IN REUTERS: ZETE.BO
Inside the Document
01
02
03
Management Commentary
Quarterly Highlights
Order Book Status
04
Way Forward
05
Strategic Priorities
06
07
08
09
Financial Statement Summary
Disclaimer
Contact Us
Annexures
Management Commentary
ZEN TECHNOLOGIES LIMITED
Q1FY23 Earnings Presentation
03
Commenting on the performance of Q1FY23, Mr. Ashok Atluri, Chairman, Managing Director commented:
"I am pleased to share an update to accompany our Q1FY23 results and happy to report that all our efforts during the last two years are now starting to bear fruits.
We've had a particularly strong start to the year and have delivered on our commitment by executing an export order worth ₹ 19.94 Cr. on time. This is despite the severe challenges faced due to supply chain constraints resulting in an erratic supply of critical electric components. We also remain on track for executing our anti-drone order during the year, and I am glad to share that we have already executed the First-off production model for the same.
Having overcome the supply constraints by internally re-designing our sub-systems, we remain confident that we will be able to execute our complete equipment order book (₹ 290 Cr. as of 30th June 2022) during the remaining part of the year. Given the substantial operating leverage built into our business model, we expect FY23 to be a year of robust financial performance at Zen.
On our order book and order status front, we have received an AMC contract worth ₹ 47 Cr, wherein the revenues will be recognised periodically over the next five years. Additionally, our positive interaction with customers gives us the visibility of replenishing
our order book to the existing levels in the second half of the year.
As discussed earlier, two focus areas at Zen remain enhancing our focus on R&D and tapping the potential in export markets. To this effect, we have strengthened our investments in our R&D team and initiatives and roped in a professional CFO to increase our management bandwidth. Furthermore, with support from the Indian Government to focus on exports, we are taking positive strides to establish a demonstration centre in Abu-Dhabi in a phased manner.
The extremely favourable environment for the Indian defence players created by the current Government acts as an antidote to the Covid-impacted environment. One example is the Indian Government's robust simulation framework, which gives us confidence that in the coming years will see a very strong performance.
#WalkingTheTalk #Atmanirbhar initiatives and announced policy actions clearly indicate the Government's resolve to make India self-reliant in defence. This augurs well for companies like Zen which have developed and continue to invest in developing their IP for global markets."
04
Quarterly Highlights
All data ₹ in crores
REVENUE FROM OPERATIONS (YOY)
EBITDA (YOY)
PROFIT AFTER TAX (YOY)
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
33.23
9.13
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
13.37
0.70
Q1FY22
Q1FY23
Q1FY22
Q1FY23
9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 -1.00
8.21
-0.34
Q1FY22
Q1FY23
REVENUE SEGMENTATION
REVENUE SEGMENTATION
R & D EXPENSES
8.99
24.24
7.34
1.79
Q1FY22
Q1FY23
SALES OF EQUIPMENT
AMC
28.00
24.00
20.00
16.00
12.00
8.00
4.00
0.00
1.79
19.95
4.29
Q1FY22
Q1FY23
Domestic
Export
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00
4.15
3.46
Q1FY22
Q1FY23
Order Book Status
05
ORDER BOOK
+
NEW ORDERS
-
ORDERS EXECUTED
=
TOTAL ORDER
BOOK
Order Book as on 1st April 2022
AMC: 115.63 Cr Equipment: 315.09 Cr Total: 430.72 Cr
New Order bagged in Q1FY23
AMC: 47.16 Cr Equipment: NIL Total: 47.16
Orders executed in Q1FY23
AMC: 8.99 Cr Equipment: 24.24 Cr Total: 33.23 Cr
Total Order Book as on 30th June 2022
AMC: 153.80 Cr Equipment: 290.85 Cr Total: 444.65
Way Forward
INCREASING PREDICTABILITY IN TURNOVER:
We are working towards strategically positioning the business model to reduce lumpiness. The sale of equipment done in the last couple of years will start contributing to the top line in terms of Annual Maintenance Contracts.
06
EQUIPMENT ORDER WINS:
In the next couple of years the contributions from AMC stream will cover the fixed operating expenses of the business. This will provide stability and predictability to the business operation. The huge order wins of equipment can then offer huge operating leverage and boost to our bottom line.
STRONG GOVERNMENT SUPPORT TO ACT AS TAILWIND:
The GOI has formulated several measures along with strict implementation timelines. The governments keen focus on Make in India and Atmanirbhar Bharat campaign has created a conducive environment to make in India for the defence industry. This should act as a strong tailwind going forward
FOCUS ON NEW PRODUCTS:
ZEN TECHNOLOGIES LIMITED
Q1FY23 Earnings Presentation
The continuous investments in R&D ensure that the products are technologically advanced and suited for the customer requirements. This coupled with more than 2 decades of track record of delivering value to our customers has not only made us the preferred partner of choice but has also ensured enhanced share of their wallet.
Strategic Priorities
The business model of the company has been strategically positioned to reduce lumpiness and enhance the profitability in the coming years.
07
Continue to grow the sales of Equipment and expand the product portfolio with strong focus on emerging space Anti-Drone systems.
Scale the AMC business, where the contributions from AMC can take care of the fixed operating expenses.
Streamlining operational efficiencies and focusing on cost optimisation and enhancing financial performance
Enhance technical capabilities by increasing our investments R&D and getting into high value-added complex systems
Establishing the Demo centre at Abu-Dhabi and focusing on export markets expand the international presence and exports with friendly countries
Financial Statement Summary
SUMMARY OF PROFIT & LOSS STATEMENT All data ₹ in crores
08
Particulars
Net Sales
Other Operating Revenue
Total Sales
Total Operating Expenses
EBITDA
EBITDA Margins
Interest Cost
Depreciation
Profit Before Tax
Profit After Tax
Q1FY23
Q1FY22
Q4FY22
33.23
2.15
35.38
22.00
13.38
37.80%
0.59
0.92
11.87
8.21
9.13
0.74
9.87
9.17
0.70
7.05%
0.14
0.99
(0.44)
(0.34)
15.97
2.60
18.57
16.07
2.50
13.47%
0.62
0.90
0.71
1.40
Disclaimer
09
This document which have been prepared by Zen Technologies Limited (the “Company”), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company.
This document has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Document. This Document may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Document is expressly excluded.
Certain matters discussed in this Document may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability to successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Document. The Company assumes no obligation to update any forward-looking information contained in this Document. Any forward-looking statements and projections made by third parties included in this Document are not adopted by the Company and the Company is not responsible for such third-party statements and projections.
Let’s connect
10
HANSRAJ SINGH RAJPUT
DIWAKAR PINGLE
ABHISHEK MEHRA
cosec@zentechnologies.com
Diwakar.pingle@in.ey.com
abhishek@theinvestmentlab.in
Company Secretary & Compliance Officer
Investor Relations Advisor
Zen Technologies Limited
Ernst & Young
Investor Relations Advisor TIL Advisors
Annexures
Zen Technologies at a glance
A pioneer in providing state of art Defence Training Solutions, Drones and Anti-Drone Solutions for imparting defense training and measuring combat readiness of security forces. The company is engaged in indigenous design, development and manufacturing of sensors and simulators technology based defence training systems.
28+
YEARS OF EXPERIENCE
ORDER BOOK OF
~445
CRORES*
100+
CUSTOMERS SERVED
250+
EMPLOYEES
109
PATENTS FILED
1,000+
CUMULATIVE INSTALLATIONS
*Order book as on 30th June 2022
Business Canvas
EQUIPMENT
COMBAT TRAINING CENTRE
ANNUAL MAINTENANCE CONTRACT
• A leader in manufacturing defence
training solution with > 95% market share in tank simulators.
•
Infrequent but large order size with long closing cycles is an inherent characteristic of this segment.
• Huge opportunity size in existing
products with strong focus on R&D for continuous new additions to product basket.
•
Focus on Anti-Drone Simulators
• A training platform to provide realistic battle experiences by integrating together the entire range of product offerings.
• Big ticket size offerings with potential order wins worth USD 25M for single installation.
• Expected growth in export market on the back of attractive EXIM financing options.
• A recurring revenue stream with superior profitability margins.
• Addition in simulator installations base leads to growth in revenues from AMC
• Growing service revenue from AMC
ensures profitability even in absence and lumpiness of new equipment orders
• AMC revenues start kicking in after
3 years of equipment installation.
R&D – Our Strong Suit
At Zen, continuous research efforts have resulted in creation of diverse technological solutions and corresponding patent portfolio. Till date the company has filed for more than 109 patents for the pioneering initiatives undertaken, of which 27 have been granted.
~71
CRORES OF INVESTMENTS IN R&D IN LAST 5 YEARS
~18%
OF CUMULATIVE SALES INVESTED IN R&D IN THE LAST 5 YEARS
109
PATENTS FILED
•
•
IP driven business with bill of materials not contributing to more than 10%-25% of the final product cost.
Investments in R&D over the last years has resulted in continuous new product additions. The company has recently come out with Anti-Drone system technology and is making further investments in development of Air Defence Gun Simulators.
• Willing to take short term pain with possibility of long-
term gains.
•
Investments made in R&D written off in P&L
• High investments made in R&D throughout the lifetime of the
company make creates high entry barriers for a new entrant.
New Product Additions
Anti-Drone Systems
Anti-Drone Simulators & Drone Simulators
Integrated Air Defence Combat Simulators
Logistic Drones
• With changing warfare dynamics, drones have become a major threat to any country’s security.
• Authorities across the globe investing in technologies to neutralize this threat.
• Wide applications. Not only restricted to military training.
• A huge opportunity size.
• New products to
contribute significantly to the revenues and profitability in the coming years.
Strong Regulatory Tailwinds
The defence business is a regulated one, which is largely impacted by government policy and budget allocation to the sector. The government’s keen focus on Make in India and Atmanirbhar Bharat campaign has created conducive environment
The Government of India (GOI) has formulated several measures along with strict implementation timelines.
•
Import embargo on 101 items (9 items manufactured by Zen Technologies Limited) to enhance domestic manufacturing.
• Aligning Defence Acquisition Procedure (DAP), 2020, with the long-term goals of
increase in indigenized content under various categories
• Aggressive push towards MAKE -2
•
INR 52,000 crores allocated for equipment procurement from domestic defence industry.
• Exports target of INR 35,000 crores by 2025. Strong support to the industry for exports of equipment to friendly countries by offering attractive financing option through EXIM bank.
• Enhancement of FDI limit to 74% under automatic route.
• Significant reduction in receivables from government.
The confluence of all these factors provides for a strong regulatory tailwind for the Indian defence space.
Investment Merits
ASSET-LIGHT business model
INCREASING SHARE OF AMC which is annuity in nature
STRONG REGULATORY tailwinds
Focus on HIGH VALUE COMPLEX SYSTEMS
INCREASING R & D SPENDS with special emphasis on Anti-Drone systems for armed forces
STRONG BALANCE SHEET with surplus liquidity