Content expansion led commercial vehicle play…
About the stock: ZF Commercial Vehicle Control Systems India (ZFCV) (erstwhile Wabco India), now part of the ZF Group, is the market leader in CV braking space and a technology-focused complete solutions provider.
• FY25 sales channel mix – OEM ~44%, Aftermarket ~13%, exports ~43%
• FY25 Product mix: Sale of products ~87%, Services ~13% Q3FY26 Results: On consolidated basis revenue for the quarter came in at ₹1,075 crore, up ~12.5% YoY. EBITDA in Q3FY26 stood at ₹199 crore with corresponding margins at 18.5% (up 380 bps QoQ). PAT came in at ₹140 crore (up ~17% YoY).
Investment Rationale
• Regulatory tailwinds to accelerate ADAS adoption, boost for ZFCV: ZFCV has demonstrated strong leadership in supplying braking solutions to the domestic M&HCV space with regulatory safety led persistent content per vehicle increase. The company has also in the past showcased its capability in providing ADAS solutions to domestic OEMs with partial adoption of the same by some players. Now, as we understand govt. wants to further upgrade commercial vehicles and hence mandated installation of ADAS (Advanced driver assistance system) for heavy commercial vehicles with active safety features like Advanced emergency braking system (AEBS) & Electronic stability control (ESC). We see this as a big positive for ZF CV as it can potentially increase its existing content per vehicle from the current US$ 600, as the value for upgraded system is pegged at ~₹50k (~₹25k for ESC & ~₹25k for ADAS). The company’s current ADAS offerings, directly address these mandates, providing a competitive edge. Along with this electrification of buses significantly increases ZF’s content per vehicle, especially through e-compressors and braking technologies, while rising AMT and advanced safety adoption in trucks further enhances revenue potential.
• Strong Profitability, Aftermarket Stability and Export Optionality: ZF combines high margin technology products with a stable and growing aftermarket business, providing resilience across cycles. Aftermarket growth driven by BS-VI replacement demand, retrofits, and mining activity adds recurring revenue visibility and margin stability. While exports faced short-term pressure due to U.S. tariffs, improving Europe demand, India- EU FTA, and expanding engineering exports provide medium-term upside. With strong balance sheet, technology pipeline, and exposure to both domestic CV cycle and global sourcing opportunity, ZF offers a high- quality play on CV upcycle & premiumization of CV’s in India.
Rating and Target Price
• With maintained leadership position in domestic M&HCV space, supported by its wide product portfolio, deep OEM relationships, and increasing aftermarket penetration along with long run way of content increase and healthy cash positive B/S, we have a positive view on the company and assign a BUY rating valuing ZFCV at ₹ 19,000 i.e. 51x PE on FY28E.
