Up 62% in just 4 days! What's driving the rally in this smallcap?

New Delhi: Shares of Zen Technologies have been on a roll this week. The smallcap stock from defence sector has rallied as much as 62 per cent in just four sessions since August 31.

After hitting upper circuits for three consecutive sessions, the stock was locked at Rs 153.75 on Friday, compared to Rs 94.9 on Tuesday. Shares of the company have more than doubled investors wealth in the last one year.

There are multiple reasons for the strong bull run the stock, including a strong order book and new norms for drones in India. Zen Technologies is the sole listed player in the segment on Indian bourses.

The order book of the Hyderabad-based company stood at Rs 402.6 crore on September 1, 2021 as against Rs 191.6 crore on June 30, 2021. The defence equipment maker bagged orders worth Rs 211 crore during July-August 2021.

Zen Technologies has bagged another order worth Rs 155 crore from Indian Air Force for the supply of Counter Unmanned Aircraft Systems (CUAS), it said in regulatory filing. The order will be carried out in a 12 month time frame.

Also, last week the government unveiled a new set of liberal drone rules in the country. Several approvals have been reduced to five from 25 earlier. Drones can be flown easily in green zones without any prior approval.

Also, the government has slashed charges for remote pilot license from Rs 3,000 to Rs 100 only for all categories with a validity of 10 years. The minimum penalty for the violation of rules has been reduced significantly.

What analysts say
After a secular rally, most analysts are bullish on the counter. Santosh Meena, Head of Research, Swastika Investmart, said it is a turnaround story for Zen Technologies. He expects the scrip to hit Rs 200-225 levels in the near term.

Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, said the company has seen tremendous increases in orders. "This rally might continue to be fueled by new orders. We can expect a target of Rs 185-190 in the coming few days," she added.