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    ZF Commercial Vehicle Control Systems India Limited

    ZFCVINDIANeutral
    Automobile and Auto Components·6 Nov 2025
    Management Summary

    ZF Commercial delivered a resilient performance in Q2 FY26, navigating a volatile global environment characterized by a sharp decline in U.S. exports. Domestic growth remained healthy, supported by regulatory tailwinds in Electronic Stability Control (ESC) and strong aftermarket demand. Management is focused on operational efficiencies and premiumization through e-mobility components to offset export headwinds.

    Highlights

    8

    • Revenue for Q2 reached ₹958.21 crores, a marginal increase of 0.8% YoY.

    • Consolidated Net Profit for H1 FY26 stood at ₹230.65 crores, up 10.6% YoY.

    • EBITDA margin reported at 22.9% for the second quarter.

    • Gross margin improved by approximately 160 bps Q-on-Q due to material costing and production efficiency.

    • OE sales grew by 7.4% in Q2, outperforming the 3.3% decline in the heavy-duty segment.

    • Aftermarket segment registered strong growth of 12.6% YoY.

    • Export of parts and products declined by 16% YoY, primarily due to a 20% volume drop in the U.S. market.

    • Export of services grew by 12.1% YoY, driven by increased engineering activities for global centers.

    Concerns

    1

    • U.S. Market Volume Decline

    What Changed2

    vs Q3 FY26

    Guidance items0 → 3 (+3)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    04 metrics
    1. 01Revenue₹958.21 Cr+0.8%YoY
    2. 02EBITDA Margin22.9%
    3. 03Profit After Tax₹108.3 Cr
    4. 04Gross Margin Improvement160 bps

    Segment breakdown

    OE Sales
    7.4% Revenue Growth
    Aftermarket
    12.6% Revenue Growth
    Export (Parts & Products)
    -16% Revenue Growth
    Export (Services)
    12.1% Revenue Growth
    List

    Guidance & targets

    2
    CategoryTargetPriority
    Other
    ADAS and AEBS Regulation Timeline
    April 2026
    		Low
    Market Share
    ESC Penetration in Buses
    60%
    		High

    Risks & concerns

    5
    RiskSeverity

    U.S. Market Volume Decline

    U.S. volumes dropped 20%, which was only partially offset by a 9% improvement in Europe. — Management acknowledged

    high

    Heavy-Duty Segment Slowdown

    The heavy-duty segment, where ZF products are predominantly used, saw a 3.3% decline due to improved fleet utilization. — Management acknowledged

    medium

    Regulatory Delays

    Anticipated delays in ADAS and AEBS legislation could push back the expected revenue bump from these high-value components. — Both acknowledged

    medium

    Areas of Evasion(2)

    • Specific impact of potential 50% U.S. tariffs on Chennai sourcing plans.
    • Detailed unit economics of the AMT segment beyond 'it's in the hundreds'.

    Q&A highlights

    3

    “Crystal gazing based on the tariff would be very difficult, Laksmayan... We are prepared either way by stock flexing as well as being prepared to supply whatever volumes are required by them.”

    Investors are concerned about the 20% volume drop in the U.S. and how potential future tariffs might derail the Chennai export hub strategy.

    asked by Lakshminarayanan, Tunga Investments

    2 min read5 chapters

    Detailed Narrative

    01

    Domestic OE and Aftermarket Resilience

    Despite a 3.3% decline in the heavy-duty vehicle segment, ZF's domestic OE sales grew by 7.4% in Q2 FY26. This outperformance was driven by higher Electronic Stability Control (ESC) penetration following updated regulations in September. The aftermarket segment also showed strength, growing 12.6% YoY, fueled by retrofitment of trailer ABS and replacement demand for BS IV and BS VI models.

    02

    Export Headwinds and Regional Rebalancing

    The export business faced significant pressure as parts and product exports fell by 16% YoY. This was primarily due to a 20% volume reduction in the U.S. market, which management attributed to overall market softness🌐 and tariff-related cost passing by OEMs. However, this was partially mitigated by a 9% improvement in European sales and a 12.1% growth in service exports, reinforcing India's role as a global engineering hub for ZF.

    03

    E-Mobility as a Multiplier for Kit Value

    Management highlighted that the transition to electric buses significantly increases their content per vehicle. The addition of e-compressors alone can increase ZF's contribution to a vehicle fivefold compared to traditional ICE buses. Currently, ZF is the predominant supplier of compressors for Indian EV bus OEMs, positioning them well for the accelerating state transport electrification supported by the PM e-bus sewa scheme.

    04

    Operational Efficiency Offsets Low Volume Growth

    While revenue growth was a marginal 0.8%, the company achieved a 160 bps Q-on-Q improvement in gross margins. This was attributed to active management of material costing and production efficiencies at the plant level. Additionally, the company saw a ₹187 crore improvement in working capital during H1, driven by better debtor collections and cash utilization.

    05

    Regulatory Outlook and AMT Adoption

    The adoption of Automated Manual Transmission (AMT) remains slow, with volumes currently in the 'hundreds' per month, though they have doubled YoY. Management expects growth to be driven by the mining segment and city buses where driver comfort and turnaround time are critical. Regarding ADAS and AEBS, while draft legislation points to April 2026, management anticipates a delay but remains in continuous engagement with OEMs for product readiness.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.