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Anand Rathi Report
Slightly lagging our estimate of Rs 1.42 billion, ZF Commercial Vehicle Control Systems India Ltd. Q1 Ebitda slipped 2% YoY to Rs 1.38 billion on higher employee cost. India's commercial vehicle sector is likely to grow at a healthy 7% compound annual growth rate (earlier 5%), led by infra/economic activity and the low base.
Content for CVs, due to government regulations, would increase in stages on penetration of ESC, AEBS, ADAS and EVs with potential to more than double ahead. The ESC regulation (Rs 20,000/ vehicle) for all buses would be implemented from September 2025.
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The overseas CV sector could fall in CY24, but export revenue would outstrip that of the industry due to sourcing by global group companies. The Ebitda margin would expand due to greater scale and localisation benefits.
After the recent share price fall and on improving domestic CV/export growth visibility, we upgrade to a 'Buy' at a higher target price of Rs 18,400, 55 times FY26e price to earning (earlier Rs 17,300, 50 times FY26e price to earning).
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