Defense Sector Report

June 25, 2022

Post Conference Report
For important information about YES Securities (India) Ltd. and other disclosures, refer to the end of this material. 1
June 25, 2022

TABLE OF CONTENTS
SR.No. Companies Page No.
1 Bharat Electronics Ltd 3
2 Centum Electronics Ltd 5
3 Cochin Shipyard Ltd 7
4 Data Patterns (India) Ltd 9
5 Hawking Defense Services Pvt Ltd 11
6 L&T Defence 13
7 NewSpace Research & Technologies Pvt Ltd 15
8 Paras Defence & Space Technologies Ltd 17
9 Zen Technologies Ltd 19
June 25, 2022
EVENT UPDATE| Sector: Aerospace & Defense
Reco : BUY
Bharat Electronics Ltd CMP
Target Price
: Rs 234
: Rs 280
Potential
Strong order book; healthy balance sheet Return
: +20%

We hosted Mr Dinesh Kumar Batra (Director Finance), Damodar Bhattad (GM,
Finance) and Mr Sabhari V (Sr DGM). Bharat Electronics (BHE) is a principal supplier Key Management Personnel
of many electronic products like radars, naval systems, EWS, avionics, weapon Name Designation
systems, etc. to all the 3 armed forces. In order to reduce its dependence on defence Anandi Chairman & Managing
sector, BHE has diversified into medical electronics, energy storage, unmanned Ramalingam Director
system, space electronics and systems, SAAS, ammunition, metro rail, etc. in FY22, Dinesh Kumar
Director (Finance)
non‐defence segment contributed ~12% of revenues and is expected to contribute Batra
~25‐30% of its revenues by FY24E. M V Rajasekhar
Director, R&D

We believe Govt.’s thrust on defence spending and growing opportunities in exports
and non‐defence markets would augur well for BHE. We expect ordering activity to Growth triggers
remain robust in all three defence segments over the next 3‐5 years. At CMP, the
 Strong order book of Rs575.7bn
stock trades at a PE of 20.5x/16.6x on FY23E/FY24E EPS. We maintain our BUY
providing revenue visibility for next
rating on the stock with a revised TP of Rs280 (previously Rs260) valuing the
few years
company at a PE of 20x on FY24E EPS.
 Well placed to benefit from
Key Highlights: indigenization thrust
 Management had a robust outlook on the potential opportunities owing to ∆ in stance
government's thrust on indigenization and the company expects to be a prime (1‐Yr) New Old
Rating BUY BUY
beneficiary of the same given its level of expertise, technical abilities and Target Price 280 260
successful track record of execution
 Despite facing challenges in the form of semiconductor supply, the company ∆ in earnings estimates
managed to post record operational performance in the form of highest ever FY23E FY24E
EPS (New) 11.4 14.0
revenue, EBITDA and PAT in FY22 at ~Rs153bn, Rs33bn and Rs23bn respectively.
EPS (Old) 11.4 13.0
 Owing to supply chain issues, Rs27bn worth of revenue could not be booked in % change 0.0 7.9
FY22. Out of this, the company expects Rs9bn to be recognized in 1QFY23E
Financial Summary – Y/E March (Rs mn)
 Order inflows during FY22 came in at Rs194.5bn, taking the order book to a record
high of Rs575.7bn, providing strong revenue visibility over the coming few years. (Rs mn) FY22 FY23E FY24E
~91‐92% of the order book is on nomination basis from the government and the Revenues 153,138 173,961 200,875
rest is through bidding process Yoy growth
8.9 13.6 15.5
(%)
 Key order wins in FY22 were a) Rs40bn for Akash Prime from BDL (deliverable OPM (%) 21.6 22.4 23.8
over 3‐4 years), b) Himshakti EWS worth Rs30bn, c) upgrade of EWS MI17 for
EPS (Rs) 9.6 11.4 14.0
Rs16bn, d) Medium power radar Rudra for Rs 30bn, e) fire control system worth
EPS growth
Rs14bn, f) GSL worth Rs20bn 13.7 17.8 23.5
(%)
Debt/Equity
‐ ‐ ‐
 The company expects revenue growth of 15% in the near to medium term and has (x)
given a capex guidance of ~Rs300‐400bn for the coming few years RoE (%) 18.2 18.8 19.9
 Ministry of Defence (MoD) had floated a tender for artillery fuses which had RoCE (%) 19.2 19.6 20.7
witnessed a lot of participation from private players. After several rounds, only two
companies are in the fray out of which BHE is one. Management is very hopeful of
winning the tender which has a potential of Rs50bn over 10 years
 Due to the MoD's 3 positive lists of ~310 products which seek to progressively

ban the imports of certain products, platforms, systems, etc, the company expects
the opportunity size for domestic players to be in the region of Rs2trn out of which
BHE has a visibility of Rs500bn. However, it expects a lot of private players to VIRAL SHAH
participate but is confident of competing with them Lead Analyst
shah.viral@ysil.in
 In order to diversify away from defence business, the company is targeting sectors
such as civil aviation, e‐mobility, metro rail, etc. It also intends to penetrate +91 22 68850521
emerging markets for both defence and non‐defence business to improve the HARSH TEWANEY, Associate
share of exports.


Bharat Electronics Ltd

Exhibit 1: Product Offerings
Products Product range
Defence Communication
Radios, base stations, receivers
products
Surveillance radars, fire control radars, weapon locating
Land based radars
radars, secondary surveillance radars,
Radar systems, sonar systems, fire control systems,

Naval Systems
naval communication systems
Electronic Warfare Systems ELINT, COMINT, SIGINT, IEWS, jammers
Ground control station, cockpit modules, flight control
Avionics
system
Electro Optics LRF, night vision devices, weapon sights, EO systems

Source: Company, YES Sec
June 25, 2022
Reco :
NOT
Centum Electronics Ltd CMP
RATED
: Rs 414
Target Price : ‐
Capitalising Opportunities
Potential Return : ‐
We hosted Mr. Nikhil Mallavarapu (Executive Director) and Mr. K S Desikan (CFO) to
gain insights into the company’s growth strategy and upcoming opportunities in the
Key Management Personnel
defense sector. Centum Electronics Ltd (CTE) is a globally recognized electronics
player offering services under a) build to specification, b) electronic manufacturing Name Designation
services and c) engineering R&D services and has strong presence in defense, Apparao Chairman & Managing
aerospace, space, industrial, medical and telecom sectors. The unique mix of talented Mallavarapu Director
professionals consisting of 650 design engineers has been critical in achieving design Nikhil
Executive Director
Mallavarapu
and product development capabilities. Company’s hi‐tech products with flexible
engagement models have enabled it to establish strong relationship with marquee K S. Desikan
Chief Financial Officer

global clients.
Growth Triggers
With over 25+ years of domain expertise in electronics design and manufacturing
 Centum Electronics Limited receives
solutions along with robust order book, proven execution track record and strong
DRDO's prestigious Defence
relationship with marquee clients has enabled CTE to remain one of the preferred
Technology Absorption wward
plays in the defense sector. At the CMP the stock is trading at an EV/EBITDA of 8.2x
as on FY22 earnings.  Defense, space and aerospace
contributed 44% to FY22 revenue
Key Highlights:
 Built to specification (BTS): BTS are mainly turnkey projects offering build to Financial Summary – Y/E March (Rs mn)
spec requirements thereby providing a) single point of contact for design / (Rs mn) FY20 FY21 FY22
engineering, industrialization and manufacturing, b) fastening the products time
and c) reducing the cost. This is a margin lucrative business and with the Govt.
Revenues

8,833 8,174 7,799
push by way of indigenization, management expects there is a good potential in Yoy growth (%) 6.8 (7.5) (4.6)

this segment going ahead. OPM (%) 11.1 10.9 9.5
 Electronic Manufacturing Services (EMS): CTE offers wide range of EPS (Rs) 15.7 13.3 (24.0)
manufacturing solution from printed circuit board assemblies to complex box EPS growth (%) (48.4) (15.5) (280.8)
builds, line replacement units (LRU) and full system integration. The strategy Debt/Equity (x) 1.3 1.4 1.3
going forward in this segment is to focus on medium to high volume business.
RoE (%) 11.5 5.4 2.9
The company is continuously making investment in digitalization and automation
RoCE (%) 9.1 5.1 5.8
which will help to improve operational efficiencies and productivity.
 Engineering R&D services (ER&D): ER&D mainly involves conceptualizing,

designing and certifying of electronic components or systems for large OEMs in

high reliability segments. This division has a strong domain expertise with a)
unique mix of talented professionals comprising of 1/3 of the workforce being
design engineers b) state of art design centers in Europe, North America and
India, enabling the company to work on complex problems and provide
competitive solution across the globe.
 The company has a robust order book of Rs10.9bn as on FY22 thereby providing
strong revenue visibility across all the segments.

 Defence being the largest vertical of CTE contributes 44% to the revenue. Over
the past 2 decades the company has been engaged in development and
manufacturing of modules and subsystems for defense industry and has become
one of the few Indian players to international defence OEM.
 Covid led to shortage of semi‐conductor components leading to increase in lead
times of raw materials impacted the demand. However, management expects VIRAL SHAH
revival in demand to happen in FY23E. Management plans to improve the Lead Analyst
working capital by bringing efficiency in inventory management. shah.viral@ysil.in
 With the sale of loss‐making energy division and revival of demand post covid, +91 22 68850521
management expects double digit growth in revenue for next 2‐3 years and aims HARSH TEWANEY, Associate
to improve margins by 200‐300bps.
 On the capex front management expects no major capex in FY23E.

Centum Electronics Ltd

Industrial circuit breaker control system Small arms and ammunitions

Source: Company, YES Sec Source: Company, YES Sec
RISAT Modules and subsystems developed Elecronics for X‐ray flat panel detectors

Source: Company YES Sec Source: Company YES Sec
June 25, 2022
Cochin Shipyard Ltd Reco :
NOT
RATED
CMP : Rs 312
Efficient player primed for growth
Target Price : ‐
We hosted Mr Madhu S Nair, Chairman & MD and Mr V J Jose, Director (Finance)
from Cochin Shipyard Ltd (CSL) through virtual call on our defence conference. CSL is

a 50‐year‐old PSU dealing in ship building and ship repairs having a largest
shipbuilding and maintenance facility in India with capacity to build ships up to Key Management Personnel
110,000 DWT and repair ships up to 125,000 DWT. CSL developed India’s first Name Designation
indigenous aircraft carrier – INS Vikrant, which started sea trials in August’21 and is
Madhu S Nair Chairman & MD
scheduled for delivery by July’22. Further, the company’s customer segments like
defence sector and other commercial sector provides stronger business growth V J Jose Director (Finance)
considering GoI’s impetus towards these sectors through ‘indigenisation’ and ‘Blue
Revolution’.
Growth Triggers
 Signed contracts with Dredging
Over FY17‐22, given its industry expertise, healthy order book and huge capacity,
Corporation of India (DCI) to build
CSL has been able to deliver Revenue/Adj. PAT CAGR of 9%/13% respectively. At
India’s largest dredger, 12,000 m3
CMP, the stock trades at a PE of 7.3x on FY22 EPS.
TSHD
Key Highlights:  Gradual exposure to European

market to be a key monitorable
 Management guided for flattish growth in FY23E largely due to the nature of the
order backlog, however for FY24E it was confident of achieving 10‐12% topline
growth. Financial Summary – Y/E March (Rs mn)
 On the shipbuilding side, it expects the Indigenous Aircraft Carrier to be delivered (Rs mn) FY20 FY21 FY22

in July'22 to the Navy after which certain post‐commissioning work will be pending Revenues
34,220 28,189 31,909
which is as per the terms of the contract
Yoy growth (%) 15.5 (17.6( 13.2
 The large naval project of 8 ASW Corvette vessels worth Rs64bn is on track with OPM (%) 20.7 25.4 19.5
5 vessels in various stages of construction. The first vessel is expected to be keel EPS (Rs) 48.5 46.27 42.87
laid in July'22.
EPS growth (%) 33.6 (4.6) (7.3)
 The company is also in the process of building four bulk carriers for JSW Steel and Debt/Equity (x) 0.0 0.0 0.0
four Floating Border Outposts (FBO) to the government
RoE (%) 17.1 15.1 12.7
 In terms of order inflows, the company has secured orders for medium size vessels RoCE (%) 17.6 14.2 10.9
from German short sea clients for the first time which has helped it to break into
the niche segment and it expects further traction from the same. It has also
received an order for a large dredger from Germany initially for one unit, but it is

expected to go up to three and will be executed by FY24E
 In Norway, it has received orders for two fully autonomous vessels. This won't
significantly add to the topline, but it will help the company gain a foothold in the
Norwegian market where there is a strong emphasis on green shipping projects
 FY23E revenue guidance is flattish while blended EBITDA margins should be in the
region of 16‐17%
 By FY24E, the company aims to achieve Rs40bn revenue out of which Rs12bn will
come from shipbuilding and an order book of Rs200bn

 Ongoing capex projects: a) new drydock in Kochi which is being developed by L&T
on a turnkey basis will come on stream by FY24E at a cost of Rs~18bn and b) Kochi
international shiplift cum repair facility is 78% complete VIRAL SHAH
Lead Analyst
 The company has a long‐term strategic plan named 'Cruise 2030' which has been shah.viral@ysil.in
designed in collaboration with Boston Consulting Group under which a new
+91 22 68850521
division has been created 'CSL Strategic & Advanced Solutions'. This division will
provide end‐to‐end defence solutions to Ministry of Defence and DRDO. The HARSH TEWANEY, Associate
company intends to venture into green energy, batteries, e‐mobility, etc. and has
already developed an electric vessel with a capacity of 500 tons and 1800kW
battery which is currently imported

Cochin Shipyard Ltd

Tankers, product carriers, bulk carriers,
Ship building passenger vessels, high bollard pull tugs,
air defence ship
Ship repairs 500T Bollard Test facility

June 25, 2022
Reco :
NOT
Data Patterns (India) Ltd CMP
RATED
: Rs 649
Target Price : ‐
Harnessing external support and self‐capabilities
We hosted Mr. Srinivasagopalan Rangarajan, CMD, Mr. Venkata Subramanian
Venkatachalam, CFO and Mr. Vijay Kumar Ananth, COO for our defence day to gain
insights into order pipeline, upcoming opportunity and payment cycle. Data Patterns
(DATAPATT) is among the few vertically integrated defence and aerospace Name Qualification & Experience
electronics solution provider catering to the indigenously developed defence Srinivasagopalan Chief Executive Officer
products and the core competency lies in self‐built radars, electronic warfare (EW), Rangarajan & Managing Director
avionics, other electronics for aircrafts, under water communication and many others. Chief Operations
Vijay Ananth K
Officer
From a supplier to manufacturer of sub‐systems for satellite, the company now
Venkata S.
evolved into a manufacturer of satellite with in‐house design and development Chief Financial Officer

Venkatachalam
capabilities.
We believe DATAPATT’s design and build capabilities across the entire spectrum of Growth Triggers
strategic defence and aerospace electronics solutions at competitive prices and its  Government mandate of 50% value
ability to partner with customers through the life cycle of a product, from conception addition in India of products bought in
till deployment will help company leverage its operating efficiencies in the coming the sector to be attractive for
years. Given its well diversified product portfolio, consistent repeat orders from DATAPATT
customers, healthy order book and proven execution track record, DATAPATT has
 Getting in the process of making large
been able to deliver Revenues/Adj. PAT CAGR of 33%/130% over FY19‐22
satellites
respectively. At the CMP the stock is trading at a P/E of 35.8x and an EV/EBITDA of
22.8x as on FY22 earnings.
Financial Summary – Y/E March (Rs mn)
Key Highlights: (Rs mn)
FY20 FY21 FY22
 The management expressed that it is currently looking at making large satellites Revenues 1,561 2,240 3,109
after successfully delivering the nano satellites. It also wants to be an equipment
Yoy growth (%) 19.1 43.5 38.8
supplier as almost everything in the sector is imported in India.
OPM (%) 27.6 41.1 45.4
 The company works on the competency model, where products are created ahead EPS (Rs) 4.5 11.9 18.1
of the market requirement in its facilities. Also, the company meets its own raw
EPS growth (%) 173.3 164.0 52.3
material demands by making components in‐house. It’s industrial knowhow and
technological capabilities will enable the company in making the components and Debt/Equity (x) 0.5 0.4 0.2
equipment needed in the industry. RoE (%) 18.2 31.0 17.3
 As on Q4FY22, order book stands at ~Rs.4.8bn (1.5x FY22 revenues) comprising RoCE (%) 12.6 26.2 16.5
majorly of radars and electronic lock to be executed over 2 years. Of the total
orders, development contracts jumped to 4‐fold constituting 52% of total order
book providing contracts visibility while 43% was constituted form production
contracts.

 Going ahead, DATAPATT is looking at order inflow of Rs20‐30bn largely from
radars, electronic warfare (EW), EW on ground systems – next gen ground
receivers.
 The company is doubling its manufacturing facility in Chennai to 200,000sqft and
is in the process of setting up additional SMT lines and testing infrastructure in
FY23E.
 On the working capital front, management indicated that there has been some
improvement in clllections led by operational efficiencies. The company has
reduced its working capital cycle from 355 days in FY21 to 329 days in FY22 and
is expected to reduce further. VIRAL SHAH
Lead Analyst
 As part of the indigenization process in the defence sector, the government has shah.viral@ysil.in
mandated that for any product bought, 50% of it should be value‐added in India.
+91 22 68850521
This is a huge requirement, considering the current availability status in India and
becomes attractive for companies like DATAPATT who build the equipment and HARSH TEWANEY, Associate
the domain.


Data Patterns (India) Ltd

Surveillance Radars, Weather Radars, Wind Profile

Radars radars, Tracking Radars, BrahMos missile seeker,
Identify Friend or Foe (IFF) seeker
Light utility helicopter cockpit display, Fixed wing

Avionics cockpit displays, Next Generation Software Defined
Radio (SDR) for fighter aircraft
Development of ATE for critical Aerospace

requirements for test benches for PSLV, GSLV and
Automated Test Equipment DRDO for validation of electronics on various
platforms. Developed BrahMos Missile Checkout
Equipmen
Focused on building Small and Nano Satellites for

Space Systems
Defence, Educational Institutes, etc
COTS product is to provide the technological

COTS Boards capability to develop system level products with very
fast run around times
V/UHF monitoring receiver, V/UHF search receiver,
Wide band signal processing unit, Next generation
Electronic warfare suite COMM EW receiver, Digital direction finder,
Airborne radar warning receiver, Radar warning
receiver

June 25, 2022
Reco :
NOT
Hawking Defense Services CMP
RATED
: UNLISTED
Pvt Ltd Target Price : ‐
Exciting player on the horizon

We hosted Dr Rajeev Koundinya, CEO of Hawking Defense Services Pvt Ltd (HDS). Key Management Personnel
HDS is a specialized player in providing unmanned technological solutions to defence
Name Designation
sector both in India and abroad. It has a wide range of customized products such as
anti‐drone solutions, long endurable RPA, drone swarms, amphibious aircraft, TBI Vijaynarayanan
Managing Director
Rapalli
mobile scanner in aerial, terrestrial and marine sectors. The company has recently
Dr Rajeev
signed a MoU with Australian UAV technologies for defence R&D thereby enabling Chief Executive Officer
Koundinya
cost effective solutions and services to the defence sector. Capt Amber
Director

Singh Uban

The company has a strong in‐house design team for product designing and analysis

using advanced software for stockpile assessment, volumetric analysis, and
topography survey. It is experienced in fixed‐wing mapping and GIS application and Growth Triggers
Aquatic Remote Sensing, which is headed by experienced professionals with over 14  Tie‐up with Australian UAV
years of operations in government projects. technologies
Key Highlights:  Increasing adoption of drones in

defence applications
 The company is very bullish on the future of the emerging drone ecosystem in India
and expects to capitalize on the emerging market. Management believes that the
Indian drone market is 10 to 15 years behind countries like USA, UK, Germany,
Australia, Israel, etc.
 As a part of its strategy, it would focus on defence applications as it believes civilian
applications will get saturated in due course of time.
 The international market has good opportunities in both defence (where

US/European companies are strong) and non‐defence (dominated by Chinese

players). Management indicated emerging geographies like Nepal, Bangladesh,
ASEAN, Africa, etc. are 10 years behind India and which provides a good
opportunity for Indian companies to tap.
 The company is of the belief that India is taking baby steps towards adoption of
drones and that the government has brought in well‐thought out policies to enable
the same
 Though its largest competitor is HAL, the company believes it has an edge over
HAL owing to its technological capabilities, access to global companies, low cost
of operation and higher endurance of products
 Among its product portfolio, the company has a fixed wing aircraft which weighs
7kg and has 18hrs of endurance which is primarily used for intelligence,
surveillance and reconnaissance activities. It has a tie‐up with an Australian
company for the engine which alone accounts for ~27‐28% of the total cost of the
aircraft
 The product pipeline is quite promising as the company has developed prototypes
like drone detector and jammer, GPS Spoofer, drone flare, etc.

 Its current and upcoming products have evinced interest from government bodies
like MoD, Coast Guard, National Disaster Management Authority, Sports Authority
of India, etc. It has garnered orders of ~1,200 units of anti‐drone detector and
jammer from MoD and the company intends to bag orders from the army's various
regional commands (Northern, Western, Southern, etc.) that have an Emergency
VIRAL SHAH
Procurement Fund which doesn't operate on bidding/tendering basis.
Lead Analyst
shah.viral@ysil.in
+91 22 68850521
HARSH TEWANEY, Associate


Hawking Defense Services Pvt Ltd

Anti‐drone technology Modular systems
Long endurance UAV Flamingo HD
Amphibian aircraft G‐111 amphibian aircraft

June 25, 2022
Reco :
NOT
L&T Defence CMP
RATED
: UNLISTED
Target Price : ‐
Key beneficiary of Atmanirbhar Bharat
L&T Defence provides indigenous, design‐to‐delivery solutions across the defence
spectrum – Guns and armoured systems, aerospace systems, military communication
systems, unmanned systems, frontline warships, auxiliary vessels, special naval
platforms, submarines and underwater platforms, weapon and engineering systems, Name Designation
radar systems. The company also offers specialised turnkey defence construction J D Patil Board Member
solutions like underground structures, military bases, storage depots, smart

infrastructure and modernisation of existing facilities.
The company has a proven command and competence for over three decades. It Growth Triggers
offers specialized turnkey defence construction solutions and by virtue of L&T’s IT  Proven track record and beneficiary
business, it is capable of providing seamless integration of solutions. Till date, the of govt’s indigenization thrust
company has indigenously developed more than 250 defence products, and more  Comfortable balance sheet and
than 50 of them have been delivered in serial production mode. support of parent
Key Highlights:
 Management indicated various initiatives from the Govt. such as policies,
transparencies, indigenization, etc. would bring much needed boost for the sector
going forward. This is expected to boost the opportunities for Private as well as
PSU players in the space.

 Further they believe geopolitical tensions such as Russia‐Ukraine crisis,
Azerbaijan‐Armenia conflict, India‐China border dispute etc. have only accelerated

the need for indigenization.
 Government is keen to fast track the various indigenization programmes and there
is a clear intent to develop the domestic defence ecosystem over time.

 In terms of R&D, it they believe that India has a cost advantage over developed
countries which can help Private Sector & PSU’s going ahead
 In terms of opportunity, on a macro basis out of the Rs 1.5‐1.6trn country level

Defence Capex spends, the domestic players could potentially bag a sizeable
portion over time with the list of 300+ items being reserved for the domestic

players.
 Of the total capital expenditure, opportunity prospects for L&T is to the tune of
Rs280bn (including repeat order for Vajra gun) in FY23E. In FY22, order inflows
came in at ~Rs50‐60bn and for the next 4 years, the company expects order inflow
CAGR of 20%+.

 Post 2001, the company has ventured into various segments in defence such as
Submarine Construction, Aerospace, Avionics and Defence Electronics, Precision
Manufacturing, Armoured System, etc. over the years.

 Going forward, the company is exploring various futuristic technologies such as
drones, electronics, high powered radar systems warfare and other emerging
technologies and expects to build its base around them.
 L&T’s largest consumer in defence is the Indian govt. with exports currently
accounting for 10% of total revenue. Management believes primary focus on

domestic market to continue.
VIRAL SHAH
Lead Analyst
shah.viral@ysil.in

+91 22 68850521


L&T Defence

Guns and armoured systems, Missiles and Aerospace

Defence and Aerospace Systems, Avionics, Sensors and Robotics, Submarines
products and Underwater Platforms, Weapon and Engineering
Systems, Unmanned Systems, Radar Systems
Frontline Warships, Submarines, Auxiliary Vessels,

Defence shipbuilding
Special Naval Platforms

June 25, 2022
Reco :
NOT
NewSpace Research & Technologies RATED
CMP : UNLISTED
Pvt Ltd Target Price : ‐
Moving into higher orbits
We hosted Mr. Hrishi Gandhi (President ‐ Finance) from NewSpace Research and
Technologies (NRT) for YES Securities Defence Conference to gain insights upcoming
sectoral opportunities, various Govt. initiatives and on bid pipeline. NewSpace
Research and Technologies (NRT) has an established track record of over 5 years of Name Designation
delivering pioneering solutions for aerospace in industrial UAVs, collective robotics, Sameer Joshi Co‐founder & CEO
GPS denied visual inertial navigation, AI modules, augmented & virtual reality Julius Amrit Co‐founder & COO
simulations. It is engaged in the development of persistent drones operating from
Hrishi Gandhi President – Finance
5km to 20 km with varied endurance (few days to months) used for earth observation

and communications.
Growth Triggers
Key Highlights:  Bagged order to manufacture 100
 Over the last two years, the company has focused on technological development swarn drones from Indian defense
with revenue flowing in from Mar’21. In FY22, NRT revenue stood at Rs159mn  Fund raising of $15mn done from
mainly through supply of Multi Rotor Unmanned System (MUAS) to Govt of India. Pavestone Technologies Fund
The company has a strong orderbook of Rs1250mn as on FY22. Going forward, it
plans to switch to unmanned technology through the product offerings such as  MoD signs design and development
intelligent UAV, swarming, collaborative autonomy and cyber physical system. contract with NRT to develop HAPS
 Multi Rotor Small Unmanned System (MUAS) – Multi rotors are UAVs that use
more than two rotors with fixed‐pitch spinning blades that can generate pay load
of varying range. Current order book stands at Rs1.25Bn and expects order inflows
of Rs1.15bn in FY23E providing the company strong revenue visibility over 2‐3

years. Till date the company has successfully delivered 52 swarn drones and
additional 20 drones expected to be supplied in July’22.

 High Altitude Pseudo Satellite (HAPS) ‐ HAPS is an Unmanned Aerial Vehicle (UAV)
powered by solar energy which can fly above stratosphere with an endurance of
about 3 months and is mainly used for communication purpose for armed forces.
NRT plans to develop the first prototype for tests within the next 4 years which is
funded by IDEX and HAL being the lead prototype manufacturer.

 Air Launched Flexible Assets (ALFA) – It is the flagship program of the company
having a manufacturing tie‐up with HAL. The specialty of this UAV is that it can be
launched from fighter aircraft in the Indian territory and can enter enemy territory.
Currently the product in the development stage Ph‐4 and believes the market size
for this product to be ~$400mn.

 Human Machine Interface (HMD) – It’s an augmented reality head mounted display
(ARHMD) and Indian army is in the process of acquiring this new technology by
procuring 556 (ARHMD) systems under Make – II category. After successful
evaluation of 40 vendor responses, currently 3 vendors have been shortlisted of
which NRT is one of them. In term of pricing, one of its competitors in US‐
Microsoft supplying a helmet at a cost of Rs2.5mn/unit to US army whereas NRT
plans to bring the cost down to Rs1.2‐1.3mn/unit.
 In FY22, Company has raised funds from Pavestone Technology Fund of US$21mn

(i.e. Rs1650mn) for 14.18% stake. The funding will be utilized for execution of

orders bagged, R&D and for new bird HL‐150.
 The company has a manufacturing facility of 6000sq.ft where the capacity is to
manufacture 2‐3 drones per day. Additionally the company has acquired VIRAL SHAH
Lead Analyst
35,000sq.ft for future expansion.
shah.viral@ysil.in
+91 22 68850521

NewSpace Research & Technologies Pvt Ltd

Exhibit 7: Product offerings
Key products Multi Rotor Unmanned system (MUAS)
Unmanned
air systems
Artificial Collective
intelligence robotics
Product
Offerings
Machine GPS denied
learning operations
Virtual Augmented
reality reality
Air Launched Flexible Asset (ALFA) High Altitude Pseudo Satellite (HAPS)
June 25, 2022
EVENT UPDATE| Sector: Defence Products & Solutions
Reco :
NOT
Paras Defence & Space Technologies RATED
CMP : Rs. 557
Target Price : ‐
Continuing the profitability play
We hosted Mr. Amit Mahajan, Director (Technical and R&D) for our defence day to
gain insights into order pipeline, upcoming opportunities and impact of indigenisation
on the company. Paras Defence & Space Technologies (Paras) is an IDDM category
Name Designation
private sector company engaged in designing, developing, manufacturing and testing
of defence and space engineering products and solutions. Its products are categorised Sharad Shah Chairman
under four major segments of Indian defence sector i.e. defence and space optics, Munjal Shah Managing Director
defence electronics, EMP protection solution and heavy engineering. It is also the sole Harsh Bhansali Chief Financial Officer
Indian supplier of critical imaging components such as large size optics and diffractive
gratings for space applications in India, working closely with ISRO.
Over FY17‐22, given its industry knowhow, healthy order book and technological Growth Triggers
advancement, Paras has been able to deliver Revenues/Adj. PAT CAGR of 30/68%  Governments positive list contains
respectively. At the CMP the stock is trading at a P/E of 80x and an EV/EBITDA of exposure to Paras as it has EMP
41x as on FY22 earnings. products listed
Key Highlights:  Paras to focus on precision optics to
increase profitability over 3‐5 years
 Management indicated that it is well‐placed in the market and confident about
growing the order book with the company being the topmost manufacturer of
optical lenses and diffractive gratings for space applications in India. Financial Summary – Y/E March (Rs mn)
 The company witnessed ~100% growth in its order book to ~Rs.6bn (~3.3x FY22 (Rs mn) FY20 FY21 FY22
revenues) in FY22 and expects similar jump in the books in FY23E. Major orders Revenues 1,470 1,433 1,826
currently in hand includes order worth Rs1.11bn by DRDO to monitor tank YoY growth (%)
(4.8) (2.5) 27.4
electron, pericopes for submarines, T70 program, worth Rs1.5bn in defence OPM (%) 26.7 30.3 28.4
electronics and space optics orders about Rs1bn from ISRO EPS (Rs) 5 4 49
 A notable development in the company is that European player Arianspace is EPS growth (%) 3.6 (20) 72.2
enquiring with Paras for their requirements and is also interested in forming a JV Debt/Equity (x) 0.6 0.5 0.1
with the latter. RoE (%) 12 8 11

RoCE (%) 10 8 10
 Going ahead, it is aiming to have a turnover of Rs.4bn to achieve a CAGR of 50%
in sales over 3‐5 years based on its order book, huge untapped market size in space

& defence optics and defence electronics and government impetus on

indigenization
 The positive list of 310 items published by the government provides great
opportunity for the company as it includes products like EMP racks and cabinets,
EMP filters and few other products manufactured solely by Paras.
 The company is strategizing to take up its current profitability from ~40% in FY22
to 50% by focusing on its core strength ‐ precision optics. This product has been
providing a margin of ~55% as the raw material expenses here is the lowest at
around 15‐20% of other products. The company is planning to achieve the
targeted margin by increasing the share of defence optics in the revenue mix.
 On the exports front it is looking at maintaining the current levels of 15‐20% of
the revenue mix as taking the proportion higher can stretch its working capital
days.
 The company has turned debt‐free by utilizing the IPO proceeds and also funded

its working capital needs with the funds.
VIRAL SHAH
Lead Analyst
shah.viral@ysil.in

+91 22 68850521



Paras Defence & Space Technologies Ltd

Exhibit 8: Product Offerings & Facilities
Infrared lenses for thermal imaging systems,

diffractive gratings, large size optics, optical domes
Defence and Space
for missile systems, metal mirrors for astronomy
Optics
and space research, gyroscope components, Opto‐
mechanical assemblies
Rugged control system, Naval control systems,

Rugged displays, Rugged computers for land,
Defence Electronics
Rugged consoles and wired cabinets, Non‐contact
proximity sensor
Flow formed tubes, Vacuum brazed cold plates,

Remotely controlled border defence system,
Heavy Engineering
Titanium structures and assem, Large and heavy
for Defence
dynamic structures, flow‐forming machines, Racks,
cabinets and consoles,
Turnkey EMP shielding, EMP racks and cabinets,

High performance EMP filters, Shielded doors
EMP Protection
meant for electro‐magnetic interference,
Solutions
Honeycomb air vents, Onsite installation,
commissioning and testing
Large deployable antennas for space applications,
Carbon fiber reinforced polymer, Avionic suites,
Niche Technologies Military winches for land, Turret stabilization for
tank, Capsule size drones for defence, CubeSats
for various space applications

For important information about YES Securities (India) Ltd. and other disclosures, refer to the end of this material.
June 25, 2022
Reco :
NOT
Zen Technologies Ltd CMP
RATED
: Rs 175
Target Price : ‐
Well placed in the space Potential Return : ‐

We hosted Mr. Ashok Atluri (MD) and Mr. Afzal Malkani (Finance Consultant) at YSL
Defense Conference to gain insights into the company’s growth strategy and Key Management Personnel
upcoming opportunities in the sector. Incorporated in 1993, Zen Technologies Name Designation
Limited (ZEN) is a pioneer and leader in providing world class state‐of‐the art defense Ashok Atluri Chairman and MD
training solutions, drones and anti‐drones solutions based on sensors and simulators
Ravi K
technology and has served over 100+ institutional customers. With a dedicated R&D Whole time director
Midathala
and production facility in Hyderabad, ZEN has applied for over 109 patents and Ravindra K Non‐executive
shipped more than 1,000 training systems across the globe. At the CMP, the company Tyagi independent director
is trading at P/BV of 4.9x of FY22.
Growth Triggers
Key Highlights:
 Indian army issues notification for
 ZEN having its own training platform provides a real‐world battle experience by Agniveer recruitment
integrating its entire range of product offerings with focus on time & cost saving
and better training standards. With the recent announcement of Agneepath  Secured order of Rs1.5bn from Indian
scheme where 46,000 Agniveers will be recruited and trained in 6 months (earlier Air Force (IAF) for supply of Counter
1 year), ZEN could be one of the beneficiaries of the same. Unmanned Aircraft Systems (CUAS)

 The company has a robust order book of Rs4.3bn (sale of equipment‐Rs3bn) which
executable in FY23E and AMC business (Rs1.1bn). For FY23E, management Financial Summary – Y/E March (Rs mn)
expects order inflow of Rs4bn in sale of equipment business. (Rs mn) FY20 FY21 FY22
Revenues 1,493 546 698
 The company expects to grow at 25% CAGR for the next 2‐3 years excluding the
potential revenue from anti drone systems (ADS) and Agneepath. Yoy growth (%) 61.9 ‐63.4 27.7
OPM (%) 41.9 13.5 6.5
 AMC revenues start kicking in after 2 years of equipment installation. Given an
EPS (Rs) 7.4 0.3 0.4
average simulator life‐span of about 10‐15 years, AMC business is a growing
EPS growth 340.5 ‐95.3 4.2
segment for the company and the management expects this segment to grow by
Debt/Equity (x) 0.0 0.0 0.1
Rs50‐100mn every year.
RoE (%) 31.4 0.8 ‐0.1
 With years of research, ZEN has now forayed into drones and anti‐drone systems RoCE (%) 29.9 0.7 ‐0.1
and has developed products which are completely in‐house used for identifying
and jamming drones in all bands which most of the peer solutions are restricted to.
 New framework issued in Sept’21 by MoD mandates compulsory utilization of
simulators by the 3‐armed forces thereby resulting in increase in demand of
simulators. With ban on import of defense items – simulators, demand of the same
is going to benefit ZEN as the competition is less in the industry.

 The company is setting up a demonstration centre in Abu Dhabi which is just on
the finalization stage in order to promote international business and is focusing at
African, Middle East countries for export business.

VIRAL SHAH
Lead Analyst
shah.viral@ysil.in

+91 22 68850521


Zen Technologies Ltd

Smart Target System (ZEN STS®) ‐ LOMAH™ Multi‐channel phased array digital module
Combat training center Corner shot weapon system (ShootEdge)

DISCLAIMER DISCLOSURE OF INTEREST
Investments in securities market are subject to market risks, read all the Name of the Research Analyst : Viral Shah, Harsh Tewaney
related documents carefully before investing.
The analyst hereby certifies that opinion expressed in this research report
The information and opinions in this report have been prepared by YSL and accurately reflect his or her personal opinion about the subject securities and
are subject to change without any notice. The report and information no part of his or her compensation was, is or will be directly or indirectly
contained herein are strictly confidential and meant solely for the intended related to the specific recommendation and opinion expressed in this research
recipient and may not be altered in any way, transmitted to, copied or report.
redistributed, in part or in whole, to any other person or to the media or
reproduced in any form, without prior written consent of YSL. Sr.
Particulars Yes/No
No.
The information and opinions contained in the research report have been Research Analyst or his/her relative’s or YSL’s financial
compiled or arrived at from sources believed to be reliable and have not 1 No
interest in the subject company(ies)
been independently verified and no guarantee, representation of warranty, Research Analyst or his/her relative or YSL’s
express or implied, is made as to their accuracy, completeness, authenticity actual/beneficial ownership of 1% or more securities of
or validity.D No information or opinions expressed constitute an offer, or an 2 the subject company(ies) at the end of the month No
invitation to make an offer, to buy or sell any securities or any derivative immediately preceding the date of publication of the
instruments related to such securities. Investments in securities are subject Research Report
to market risk. The value and return on investment may vary because of Research Analyst or his/her relative or YSL has any other
changes in interest rates, foreign exchange rates or any other reason. 3 material conflict of interest at the time of publication of No
Investors should note that each security's price or value may rise or fall and, the Research Report
accordingly, investors may even receive amounts which are less than Research Analyst has served as an officer, director or
4 No
originally invested. The investor is advised to take into consideration all risk employee of the subject company(ies)
factors including their own financial condition, suitability to risk return YSL has received any compensation from the subject
profile and the like, and take independent professional and/or tax advice 5 No
company in the past twelve months
before investing. Opinions expressed are our current opinions as of the date YSL has received any compensation for investment
appearing on this report. Investor should understand that statements 6 banking or merchant banking or brokerage services from No
regarding future prospects may not materialize and are of general nature the subject company in the past twelve months
which may not be specifically suitable to any particular investor. Past YSL has received any compensation for products or
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Actual results may differ materially from those set forth in projections. 7 No
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the past twelve months
Technical Analysis reports focus on studying the price movement and
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8 the subject company or third party in connection with the No
focussing on a company’s fundamentals and opinions, as such, may not
research report
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YSL has managed or co‐managed public offering of
YSL, its research analysts, directors, officers, employees and associates 9 securities for the subject company in the past twelve No
accept no liabilities for any loss or damage of any kind arising out of the use months
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through SEC 15a‐6 rules and regulations under an exclusive chaperone other material conflict of interest in the securities discussed herein.
arrangement with Brasil Plural Securities LLC. The views and sentiments
expressed in this research report and any findings thereof accurately reflect
YSIL analyst’s truthful views about the subject securities and or issuers
discussed herein. YSIL is not registered as a broker‐dealer under the Digitally signed by HARSH
Digitally signed by
HARSH PRADEEP
Securities Exchange Act of 1934, as amended (the "Exchange Act") and is VIRAL KISHOR VIRAL KISHOR SHAH PRADEEP TEWANEY
not a member of the Securities Investor Protection Corporation ("SIPC"). SHAH Date: 2022.06.26 Date: 2022.06.26
Brasil Plural Securities LLC is registered as a broker‐dealer under the 12:42:32 +05'30' TEWANEY 11:19:24 +05'30'
Exchange Act and is a member of SIPC. For questions or additional
information, please contact Gil Aikins (gil.aikins@brasilplural.com) or call

+1 212 388 5600.

YES Securities (India) Limited Registration Nos.: CIN: U74992MH2013PLC240971 | SEBI Single
Registration No.: NSE, BSE, MCX & NCDEX: INZ000185632 | Member
Registered Address: 2nd Floor, North Side, YES BANK House, Code: BSE – 6538, NSE – 14914, MCX – 56355 & NCDEX ‐ 1289 | CDSL:
Off Western Express Highway, Santacruz East, IN‐DP‐653‐2021 | MERCHANT BANKER: INM000012227 | RESEARCH
Mumbai ‐ 400 055, Maharashtra, India. ANALYST: INH000002376 | INVESTMENT ADVISER: INA000007331 |
Correspondence Address: 4th Floor, AFL House, Sponsor and Investment Manager to YSL Alternates Alpha Plus Fund (Cat
Lok Bharti Complex, Marol Maroshi Road, Andheri East, III AIF) SEBI Registration No.: IN/AIF3/20‐21/0818 | AMFI
Mumbai ‐ 400059, Maharashtra, India. ARN Code – 94338.
 +91 22 68850521 |  research@ysil.in Details of Compliance Officer: Name: Vaibhav Purohit,
Website: www.yesinvest.in Email id: compliance@ysil.in, Contact No: +91‐22‐6885 0278

RECOMMENDATION PARAMETERS FOR FUNDAMENTAL REPORTS
Analysts assign ratings to the stocks according to the expected upside/downside relative to the
current market price and the estimated target price. Depending on the expected returns, the
recommendations are categorized as mentioned below. The performance horizon is 12 to 18
months unless specified and the target price is defined as the analysts’ valuation for a stock. No
benchmark is applicable to the ratings mentioned in this report.
BUY ‐ Upside greater than 20% over 12 months
ADD – Upside between 10% to 20% over 12 months
NEUTRAL ‐ Upside between 0% to 10% over 12 months
REDUCE – Downside between 0% to ‐10% over 12 months
SELL – Downside greater than ‐10% over 12 months
NOT RATED / UNDER REVIEW

ABOUT YES SECURITIES (INDIA) LIMITED
YES Securities (India) Limited (‘‘YSL’’) is a wholly owned subsidiary of YES BANK LIMITED. YSL is
a SEBI registered stock broker holding membership of NSE, BSE, MCX & NCDEX. YSL is also a
SEBI registered Category I Merchant Banker, Investment Adviser and a Research Analyst. YSL
offers, inter alia, trading/investment in equity and other financial products along with various
value added services. We hereby declare that there are no disciplinary actions taken against YSL
by SEBI/Stock Exchanges.

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Post Conference Report

Radar systems, sonar systems, fire control systems,

push by way of indigenization, management expects there is a good potential in Yoy growth (%) 6.8 (7.5) (4.6)

Key Highlights:  Gradual exposure to European

 On the shipbuilding side, it expects the Indigenous Aircraft Carrier to be delivered (Rs mn) FY20 FY21 FY22

 As on Q4FY22, order book stands at ~Rs.4.8bn (1.5x FY22 revenues) comprising RoCE (%) 12.6 26.2 16.5

Surveillance Radars, Weather Radars, Wind Profile

Light utility helicopter cockpit display, Fixed wing

Development of ATE for critical Aerospace

Focused on building Small and Nano Satellites for

COTS product is to provide the technological

Key Highlights:  Increasing adoption of drones in

Guns and armoured systems, Missiles and Aerospace

Frontline Warships, Submarines, Auxiliary Vessels,

enquiring with Paras for their requirements and is also interested in forming a JV Debt/Equity (x) 0.6 0.5 0.1

with the latter. RoE (%) 12 8 11

Infrared lenses for thermal imaging systems,

Rugged control system, Naval control systems,

Flow formed tubes, Vacuum brazed cold plates,

Turnkey EMP shielding, EMP racks and cabinets,

information, please contact Gil Aikins (gil.aikins@brasilplural.com) or call

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