Zen Technologies Limited has informed the Exchange about Investor Presentation
Date: 13th November 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 Q2FY 2023
Please find attached earnings presentation for the quarter ended 30th September 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: 2022.11.13 20:48:01 +05'30' Zen Technologies Limited Earnings Presentation Q2FY23 India’s leading defence training solution provider
NSE: ZENTEC BSE: ZENTEC - 533339 BLOOMBERG: ZEN IN REUTERS: ZETE. BO
Inside the Document
01
Management Commentary
07
Business Canvas
02
03
04
05
06
Quarterly & Half-Yearly Highlights
Order Book Status
Financial Statement Summary
About the Company
Research and Development
08
09
10
11
12
Regulatory Tailwinds
Investment Merits
Strategic Priorities
Way Forward
New Product Additions
Management Commentary
Commenting on the performance of Q2FY23, Mr. Ashok Atluri, Chairman, Managing Director commented:
03
"I am pleased to share an update to accompany our Q2FY23 results and happy to report that our efforts during the last two years are now starting to bear fruit.
We continued our strong start to the year by accelerating our execution momentum in the second quarter. While we spent the first quarter of the fiscal year navigating the supply chain issues, I am pleased to report that we picked up our execution pace in the second quarter. Furthermore, the strong performance recorded by our subsidiary is also noteworthy. We remain confident in our ability to meet our earlier stated guidance of executing the entire equipment order book by Q4FY23 / Q1FY24.
Given the substantial operating leverage built into our business model, we expect FY23 to be a year of robust financial performance at Zen. We also have a strong liquidity position with ~ ₹ 153 crores parked in fixed deposits.
During the quarter, we aggressively pursued opportunities in export markets and participated in SIMTEX (Middle East), D&S (Thailand), DefExpo (Gandhinagar), SOFEX (Jordan) and
IDEF (Indonesia).
Positive customer interactions give us confidence that our order book will be replenished to its current level in H2FY23 / Q1FY24.
I am also pleased to report that we are progressing well on our plans and anticipate that phase-1 of the Abu-Dhabi demonstration centre will be operational by the end of FY23.
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 we will see a very strong performance.”
ZEN TECHNOLOGIES LIMITED
Q2FY23 Earnings Presentation
04
Quarterly Standalone Highlights
All data ₹ in crores
REVENUE FROM OPERATIONS (YOY)
EBITDA (YOY)
PROFIT AFTER TAX (YOY)
25.00
20.00
15.00
10.00
5.00
0.00
25.00
20.00
15.00
10.00
5.00
0.00
21.13
16.25
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
8.18
2.09
4.58
0.85
5.00
4.00
3.00
2.00
1.00
0.00
Q2FY22
Q2FY23
Q2FY22
Q2FY23
Q2FY22
Q2FY23
REVENUE SEGMENTATION
REVENUE SEGMENTATION
R & D EXPENSES
7.63
8.62
9.36
11.77
Q2FY22
Q2FY23
SALES OF EQUIPMENT
AMC
16.00
12.00
8.00
4.00
0.00
2.79
5.83
4.32
7.44
Q2FY22
Q2FY23
Domestic
Export
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00
4.51
4.01
Q2FY22
Q2FY23
05
Half Yearly Standalone Highlights
All data ₹ in crores
REVENUE FROM OPERATIONS (YOY)
EBITDA (YOY)
PROFIT AFTER TAX (YOY)
60.00
50.00
40.00
30.00
20.00
10.00
0.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
54.36
25.38
25.00 22.00 19.00 16.00 13.00 10.00 7.00 4.00 1.00
21.56
2.78
15.00
12.00
9.00
6.00
3.00
0.00
12.78
0.51
H1FY22
H1FY23
H1FY22
H1FY23
H1FY22
H1FY23
REVENUE SEGMENTATION
REVENUE SEGMENTATION
R & D EXPENSES
18.35
36.01
15.73
9.65
H1FY22
H1FY23
SALES OF EQUIPMENT
AMC
40.00
32.00
24.00
16.00
8.00
0.00
24.28
11.73
2.79 6.86
H1FY22
H1FY23
Domestic
Export
9.00
7.00
5.00
3.00
1.00
7.90
8.16
H1FY22
H1FY23
Consolidated Quarterly Highlights
All data ₹ in crores
06
REVENUE FROM OPERATIONS (YOY)
EBITDA (YOY)
PROFIT AFTER TAX (YOY)
33.41
15.75
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
13.07
0.82
6.00
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
5.65
-0.02
Q2FY22
Q2FY23
Q2FY22
Q2FY23
Q2FY22
Q2FY23
Consolidated Half Yearly Highlights
All data ₹ in crores
07
REVENUE FROM OPERATIONS (YOY)
EBITDA (YOY)
PROFIT AFTER TAX (YOY)
70.48
25.72
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
26.03
0.55
16.00
12.00
8.00
4.00
0.00
-4.00
13.11
-1.15
H1FY22
H1FY23
H1FY22
H1FY23
H1FY22
H1FY23
Order Book Status
08
ORDER BOOK
+
NEW ORDERS
-
ORDERS EXECUTED
=
TOTAL ORDER BOOK
Order Book as on 1st July 2022
AMC: 153.80 Cr Equipment: 290.85 Cr Total: 444.65
New Order bagged in Q2FY23
AMC: 0.73 Cr Equipment: 8.02 Total: 8.76
Orders executed in Q2FY23
AMC: 9.36 Cr Equipment: 11.77 Cr Total: 21.12 Cr
Total Order Book as on 30th September 2022
AMC: 145.17 Cr Equipment: 287.11 Cr Total: 432.28
09
Financial Statement Summary
Summary of Standalone Profit & Loss Statement All data ₹ in crores
Particulars
Net Sales
Other Operating Revenue
Total Revenue
Total Operating Expenses
EBITDA
EBITDA Margins
Interest Cost
Depreciation
Profit Before Tax
Profit After Tax
Q2FY23
Q1FY23
Q2FY22
H1FY23
H1FY22
21.13
2.80
23.93
15.74
8.19
33.23
2.15
35.38
22.00
13.38
16.25
0.96
17.21
15.13
2.08
54.36
4.95
59.31
37.75
21.56
25.38
1.70
27.09
24.31
2.78
34.22%
37.82%
12.09%
36.35%
10.26%
0.65
0.96
6.58
4.57
0.59
0.92
11.87
8.21
0.22
0.92
0.95
0.85
1.24
1.87
18.44
12.78
0.36
1.91
0.51
0.51
Financial Statement Summary
Summary of Standalone Balance Sheet All data ₹ in crores
Particulars
Total Equity
Non Current Liabilities
Current Liabilities
Total Equity and Liability
Non Current Assets
Current Assets
Total Assets
10
FY22
291.70
4.93
61.22
357.85
107.59
250.26
357.85
H1FY23
304.23
1.95
87.90
394.08
110.24
283.84
394.08
11
Financial Statement Summary
Summary of Consolidated Profit & Loss Statement All data ₹ in crores
Particulars
Net Sales
Other Operating Revenue
Total Revenue
Total Operating Expenses
EBITDA
Q2FY23
Q1FY23
Q2FY22
H1FY23
H1FY22
33.41
3.15
36.56
23.49
13.07
37.07
2.17
39.24
26.28
12.96
15.75
0.97
16.72
15.90
0.82
70.48
5.32
75.80
49.77
26.03
25.71
1.72
27.44
26.89
0.55
EBITDA Margins
35.75%
33.04%
4.88%
34.35%
2.02%
Interest Cost
Depreciation
Profit Before Tax
Profit After Tax
0.70
1.37
11.01
5.65
0.65
1.63
10.69
7.46
0.27
1.18
(0.63)
(0.02)
1.35
2.99
21.69
13.11
0.43
2.43
(2.31)
(1.15)
Financial Statement Summary
Summary of Consolidated Balance Sheet All data ₹ in crores
Particulars
Total Equity
Non Current Liabilities
Current Liabilities
Total Equity and Liability
Non Current Assets
Current Assets
Total Assets
12
FY22
289.90
7.10
71.96
368.96
92.75
276.20
368.96
H1FY23
299.94
3.64
107.27
410.85
95.17
315.68
410.85
Zen Technologies at a glance
013
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.
29+
YEARS OF EXPERIENCE
ORDER BOOK OF
~432
CRORES*
100+
CUSTOMERS SERVED
270+
EMPLOYEES
112
PATENTS FILED
1,000+
CUMULATIVE INSTALLATIONS
*Order book as on 30 th September 2022
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.
014
~75
CRORES OF INVESTMENTS IN R&D IN LAST 5 YEARS
~17%
OF CUMULATIVE SALES INVESTED IN R&D IN THE LAST 5 YEARS
112
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.
R&D Spends over the Years
All data ₹ in crores
015
160
140
120
100
80
60
40
20
0
Chart Title
146.98
92.22
54.36
53.70
49.57
61.65
52.61
38.96
8.16
13.80
12.88
14.82
12.27
12.83
12.72
14.30
As at 30.09.22
As at 31.03.22
As at 31.03.21
As at 31.03.20
As at 31.03.19
As at 31.03.18
As at 31.03.17
As at 31.03.16
Sales
R&D Expenditure
Business Canvas – A Well Diversified Business Model
016
COUNTER DRONE SOLUTIONS
COMBAT TRAINING CENTRE
ANNUAL MAINTENANCE CONTRACT
•
•
•
Anti drone systems are used to detect and/or intercept unwanted drones and unmanned aerial vehicles (UAVs).
System can detect and deactivate drones of any size within a 4-km radius.
Expect big orders in the coming years.
• Most frictionless product with strong demand in
export markets
•
One of the two IDDM suppliers for Anti-Drone
•
•
•
•
•
•
A leader in defence training solutions.
Infrequent but large orders with long closing cycles.
90% of order from repeat customers.
Comprehensive Product Range consisting of more than 50 Products (incl. Anti-drone Systems)
Big ticket size with potential orders worth $ 20 M for a single installation.
A platform providing Realistic battle experiences by Integrating Zen’s entire range of Product offerings.
•
•
•
•
A recurring revenue stream with exceptional profitability margins
New simulator sales leading to growth in revenues from AMC
Growing service revenue from AMC ensuring sustainability
Have already reached about 40 crores INR of annual AMC revenues.
• Will soon achieve 50 crores of AMC annual
revenues.
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
017
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
018
INCREASING SHARE OF AMC which is annuity in nature
Focus on HIGH VALUE COMPLEX SYSTEMS
STRONG BALANCE SHEET with surplus liquidity
High customer stickiness
ASSET-LIGHT business model
STRONG REGULATORY tailwinds
INCREASING R & D SPENDS with special emphasis on Anti-Drone systems for armed forces
Strong Technical and Management Team with high experience
Strategic Priorities
The business model of the company has been strategically positioned to reduce lumpiness and enhance the profitability in the coming years.
019
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
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.
020
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:
The continuous investments in R&D ensure that the products are technologically advanced and suited for the customer requirements. This coupled with ~ 3 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.
ZEN TECHNOLOGIES LIMITED
Q2FY23 Earnings Presentation
INCREASING FOCUS ON INTERNATIONAL MARKETS :
The keen focus on export markets has resulted in brisk growth in export footprint. The Company has a strong product and projects pipleline in the export market and expects exports to contribute more than 50% to the top line in the current financial year. Furthermore fast clearances from the Government for exports further acts as a tailwind.
New Product Additions
Anti-Drone Systems
Anti-Drone Simulators & Drone Simulators
Integrated Air Defence Combat Simulators
Logistic Drones
021
• 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.
Disclaimer
22
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 whatsoever. 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
23
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