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ICICI Securities Report
ZF Commercial Vehicle Control Systems Ltd. has delivered a 10-quarter high gross margin, driven by improving mix and lagged price hikes, resulting in flat Ebitdam QoQ.
ZF Commercial Vehicle's revenue from domestic original equipment manufacturers was up ~20% YoY, driven by new business generation from electronic stability control system sales to buses, electronic braking system applications, electronic compressors and driver assistance systems.
Going ahead, ZFI is planning to ramp-up Ebitdam, led by improving mix of new complex products at the cost of lower margin commoditised products, improving productivity and tighter control on pricing.
We are building in ~24% revenue compound annual growth rate for FY23-25E with mean Ebitdam of ~15.5%.
We downgrade ZFI to 'Hold' from 'Add' post 40% return in the past six months with a revised discounted cash flow-based target price of Rs 12,810 (earlier Rs 11,433), implying 40 times FY25E earnings.
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