ZF Commercial Vehicle Q3 Results Review - Exports Impact Overall Growth; Positives Priced In: ICICI Securities

ICICI Securities Report

ZF Commercial Vehicle Control Systems India Ltd.'s operational performance with Ebitda at Rs 1.3 billion (-8% QoQ) was below our estimate of Rs 1.6 billion. Revenues were up 3% YoY at Rs 8.9 billion with original equipment manufacturer/export/aftermarket segments’ revenues at Rs 4.8 billion/Rs 2.0 billion/Rs 1.1 billion, and growth of ~19%/(29%)%/10% YoY.

Ebitdam was at 14.9% (plus 20 basis points QoQ), driven by gross margin improvement of plus 40 basis points, partially offset by higher employee expenses. We are building in ~13% revenue compound annual growth rate for FY24-26E with mean Ebitdam of ~16%.

We have cut our revenue and margin estimates due to subdued commercial vehicle retails in recent months, and lower Q3 revenue, leading to 9%/16% cut in FY24E/FY25E earning per share.

Downgrade to 'Reduce' (from 'Hold') with a discounted cash flow -based target price of Rs 14,003 (earlier Rs 14,903), implying 43 times FY26E earning per share.

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