Buy ZF Commercial Vehicles; target of Rs 16,000: Anand Rathi

Anand Rathi's research report on ZF Commercial Vehicles

Slightly lagging ARe of Rs1.79bn, ZF’s Q4 EBITDA rose 17% y/y to Rs1.73bn on less-than-expected revenue. The ADAS regulation draft notification is out, proposing ESC, AEBS and 4 ADAS functions from Oct’26, with content opportunity of >Rs65,000/vehicle for CVs (>3.5-tonne trucks and >5-tonne buses). ESC regulation tobe implemented for most bus segments from Sep’25. Entry into LCV (leveraging ZF’s global portfolio) would add to growth (€90m sales by 2030). Content, due to government regulations, would increase in stages for CVs on penetration of ESC, AEBS, ADAS and EVs, with potential to more than double ahead. The company’s dominant market share would continue across M&H CV/LCVs even for the upcoming opportunities. India’s CV sector is to record a healthy 5% CAGR over FY25-27, led by infra/economic activity. Overseas CV sector may be muted in the near term, but export revenue would outstrip that of the industry due to increase sourcing by global group companies.

Outlook

We expect 12%/14%/15% revenue/EBITDA/PAT growth over FY25-27. We retain a Buy at a higher TP of Rs 16,000 (earlier Rs15,700; 45x FY27e P/E), 50x FY27e P/E.