ZF Commercial Vehicle India Q3 Results Review - Strong Growth With Improving Profitability: ICICI Securities

ICICI Securities Report

ZF Commercial Vehicle Control Systems India Ltd.’s Q3 FY23 Ebitda margin at 13.7% was up marginally by 10 basis points QoQ despite 60 bps improvement in gross margin as other expense line item was up 20% (as against QoQ revenue growth of 11%).

We believe volatility in freight rates and currency resulted in this sudden jump in other expenses, in an otherwise excellent quarter.

Nearly 34% YoY revenue growth was driven by 5% higher than commercial vehicle original equipment manufacturer industry growth through market share gains other than continued strength in exports.

Introduction of electronic stability control device on all buses from FY24 and continuity of CV demand growth remaining strong in FY24 post ~45% growth in FY23 are near-term revenue drivers, we believe.

As mix of replacement is coming down structurally with new products getting introduced in portfolio for OEMs, gross margin would not go back to pre-FY20 levels.

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