ZF Commercial Vehicle Control Systems India Limited — Q3 FY26 earnings call

Call held 12 Feb 2026

Management summary

ZF Commercial reported a strong Q3 FY26, with revenues crossing INR 1,100 crores for the first time in a single quarter, driven by robust market outperformance and margin expansion. The company saw significant growth in aftermarket sales and strategic product areas like EV bus components, despite a decline in exports to the US. Regulatory tailwinds for advanced safety systems and low-floor buses are expected to drive future demand, though competitive pricing in ADAS remains a watch area.

Highlights

  • Total revenues consolidated for the quarter reached INR 1,105 crores, marking a 12.8% year-on-year increase and 15.3% quarter-on-quarter growth.

  • Achieved an EBITDA margin of 20% on total sales, demonstrating strong operating performance.

  • Profit after tax (PAT) grew by 11.7% over the same quarter last year and 29.5% compared to Q2 FY26, reaching INR 140.2 crores.

  • Outperformed the commercial vehicle market by 7.5%, with overall sales rising by 28.1% compared to the market's 20.6% growth in the 6+ tonne segment.

  • Aftermarket sales grew robustly by 19.2% to INR 158 crores, driven by broad-based momentum and retro fitment demand.

Concerns

  • Export performance declined by 10.9% compared to the same period last year, primarily due to volume reduction from the U.S. market and tariff-related cost pass-throughs.

  • Discussions around ADAS pricing indicate competitive pressure, with other players offering products at a lower pricing than ZF's current offerings.

Key financials

  1. Revenue ₹1,105 Cr +12.8%YoY
  2. EBITDA Margin 20%
  3. PBT (before exceptional) ₹194.5 Cr
  4. PBT ₹186.5 Cr
  5. PAT ₹140.2 Cr +11.7%YoY
  6. PAT Margin 12.7%

What they filed

Q1 FY27: revenue up 8.2%, net profit down 17.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue907 956 1,003 963 902 −1%1,058 +11%1,133 +13%1,042 +8%
EBITDA139 175 172 128 132 −5%195 +11%183 +6%130 +2%
Net profit109 125 125 120 106 −3%139 +11%141 +13%99 −17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,061 Cr Total
  • OEM ₹520 Cr 49.0%
  • Exports (Goods) ₹259 Cr 24.4%
  • Aftermarket ₹157 Cr 14.8%
  • Service Income ₹125 Cr 11.8%

What to watch in Q4 FY26

ADAS Pricing Strategy Conclusion

Next quarter
Current Discussions ongoing with OEMs, competitors offering lower prices.
Target Directional conclusion on ADAS pricing strategy and competitive landscape.

Why it matters

Crucial for ZF's market share and profitability in the upcoming ADAS mandate era.

And as a result of that, there are several discussions and ongoing proof-of-concept related topics that are undertaken with each OEM. So, we are at an advanced stage of discussions and expect to have some directional conclusion in the coming quarter.

Risks & concerns

  • US Export Volume Decline

    medium

    Export performance declined by 10.9% YoY due to volume reduction from the U.S. market and tariff-related cost pass-throughs by OEMs.

    In Q3 financial year 2025, '26, our export performance declined by 10.9% compared to the same period last year. Primarily due to volume reduction from the U.S. market, private tariff-related cost pass-throughs by OEMs to the end customer continued to adversely impact demand.

    Management acknowledged

  • ADAS Pricing Competition

    medium

    Other players are offering ADAS products at a lower pricing, leading to ongoing discussions and proof-of-concept trials.

    But there are discussions going on in the market with regards to other players who have offered products at a lower pricing than what is currently being offered by ZF.

    Analyst acknowledged

  • Trailer Segment Dip

    low

    The overall trailer production saw a dip of about 6-7% in Q3 compared to the previous year, influenced by fleet underutilization and export declines.

    However, in this quarter, quarter 3, compared to previous year, there was a dip of about 6 to 7 percentage in the overall trailer production.

    Management acknowledged

Q&A highlights

7 direct
EBITDA Margins Improvement Direct
we typically do our retrospective price amendments in Q3. So, what you would see is a small impact of the price adjustments or collections of the increases of prices from April to September also being collected in December. That's why you see the seasonal increase in the same quarter of last year as well as this year.

Explains the significant sequential and year-on-year improvement in EBITDA margins for the quarter.

Asked by Mukesh Saraf

Exports Outlook Partial
I mean, when you're asking for outlook on a couple of years, let's say that the EMEA is showing consistent growth in vehicle production. But having said that, we are living in a very volatile world, so commenting for '27 would be difficult. In general, we can say EMEA is strengthening. But however, early days yet for the U.S. tariff announcements, and we are not able to comment on that, and we don't see that impact in EDI as yet.

Addresses the weak export performance and provides a cautious outlook for the US market, while noting strength in EMEA.

Asked by Mukesh Saraf

ECAS Mandate & Product Localization Direct
Right now, this is a draft legislation at this point of time. You might be aware that the market is gradually shifting to ultra-low entry buses to facilitate ease of entry and mobility in cities. So there is a draft legislation that in the upcoming October 2026 timeframe, all the buses that are going to be sold in major metros and cities could be ultra-low entry. And we see a potential of this ECAS being utilized in each of these buses. And currently, yes, it is an imported solution, and we have internally activated some actions towards a fully localized content.

Highlights a significant future growth driver (ECAS) tied to regulatory changes and the company's localization strategy.

Asked by Mukesh Saraf

ECAS Per Vehicle Realization Direct
So today, it's running at very low volumes. Going forward, when the volume increases, the price would also typically come down to maybe about INR25,000 to INR30,000 per vehicle.

Quantifies the potential revenue per unit for the ECAS product once volumes scale up and localization is achieved.

Asked by Mukesh Saraf

Q3 Revenue Mix Direct
Okay. So OEM was about INR520 crores, aftermarket INR157 crores and exports INR259 crores, with service income being about INR125.

Provides a detailed breakdown of revenue contribution from different business segments for the quarter.

Asked by Mukesh Saraf

ADAS/ESC Vendor Finalization & Traction Direct
On the ESC side, we are working with all of the OEMs. So, we would retain our current leadership position in terms of the ESC system overall with each truck and bus OEM. On the ADAS side, this is still at a discussion phase, advanced discussion phase with most of the OEMs. But there are discussions going on in the market with regards to other players who have offered products at a lower pricing than what is currently being offered by ZF.

Offers insight into the company's progress and competitive positioning for upcoming regulatory mandates on ESC and ADAS.

Asked by Mumuksh Mandlesha

ADAS/ESC Pricing & Competition Direct
I think the main background of the other players who have come into the segment are from a different segment, the passenger car portfolio. So, their product and offering may be differently suited. However, we are still in discussions and advanced stage of alignments with customers with vehicle proof-of-concept trials and so on. ... we are talking about what value we are offering to the customer, and we also have our own testing capability as well as the field vehicle data acquisition. So, these are the algorithms that are available with us, which are our USP when it comes to talking about the product to customers.

Addresses concerns about competitive pricing for ADAS and highlights ZF's strategy to differentiate through value and technical capabilities.

Asked by Nirali Gopani

Retrospective Price Adjustment Impact Direct
Dishant, the price adjustment. So, price increases happen with effect from 1st April, but the effect is given via POs in December, November or December. That is the reason why in December results, there would be an impact of retrospective price increases from April to September. ... It does get into the gross margin, yes.

Clarifies the accounting mechanism behind the improved margins, attributing it to retrospective price adjustments impacting the current quarter's results.

Asked by Dishant Jain

3 min read 7 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

ZF Commercial Vehicle Control Systems India Limited reported robust financial results for Q3 FY26, with total revenues reaching INR 1,105 crores. This represents a significant year-on-year growth of 12.8% and a quarter-on-quarter increase of 15.3%. The company achieved a strong EBITDA margin of 20% on total sales, and profit before tax (PBT) stood at INR 186.5 crores after accounting for INR 7.9 crores in exceptional items. Net profit after tax (PAT) was INR 140.2 crores, growing 11.7% YoY and 29.5% QoQ, with a PAT margin of 12.7%.

Indian Commercial Vehicle Industry Outlook

The Indian commercial vehicle (CV) industry, particularly the 6+ tonne segment, showed strong momentum in Q3 FY26. Goods movement grew by 6.1%, and the 6+ tonne CV segment expanded by 11%, with a 20.6% growth in Q3 alone. This growth was fueled by GST reforms, increased consumption demand, and significant government capital expenditure, including a INR 12.2 lakh crore outlay for infrastructure. The bus segment also experienced robust expansion, with EV bus sales reaching 1,219 units in Q3 FY26, supported by government tenders and procurement orders.

ZF's Market Outperformance and Strategic Initiatives

ZF's overall sales grew by 28.1% in Q3 FY26, outperforming the CV market's 20.6% growth by 7.5%. This was driven by high EV bus production, increased market share in e-compressors and EBS systems, and a sharp rise in ESC penetration due to upcoming September 2025 regulations. Aftermarket sales reached INR 158 crores, a 19.2% increase YoY, supported by retro fitment demand. While exports of goods declined by 10.9% YoY due to US market challenges, exports of services grew robustly by 11.1% YoY, driven by engineering activities for global centers.

Regulatory Developments & ECAS Localization

Upcoming regulatory changes are expected to be key growth drivers. A draft legislation for mandating ultra-low entry buses in major metros and cities by October 2026 is anticipated to significantly increase ECAS (Electronically Controlled Air Suspension) penetration. Currently, ECAS is an imported solution, but ZF is actively working on localization. The mandate for ESC (Electronic Stability Control) in buses has already led to a 3,000-unit increase in Q3 FY26 compared to the previous year. ADAS (Advanced Driver Assistance System) regulation is slated for 2027, with current per-vehicle pricing discussions around INR 20,000-25,000 for ESC and INR 40,000-45,000 for ADAS, though competitive pressures are pushing ADAS pricing lower.

Product Development and Manufacturing Expansion

The company successfully initiated production for several new products, including e-compressors, air light for truck platforms, and exhaust brake assembly products. An Advanced Driver Assistance System (ADAS) test dummy was developed through institutional collaboration. ZF is ramping up production at its new multidivisional manufacturing plant at Oragadam for advanced technology products like e-compressors and hydraulic ESCs. Assembly lines in Jamshedpur, Lucknow, and Pantnagar have also been upgraded to enhance manufacturing flexibility and delivery performance.

ESG Initiatives and Industry Recognition

Sustainability remains a core strategic priority, with the Jamshedpur facility receiving first prize in the ACMA Regional Kaizen Competition for safety and agronomic improvement. Energy conservation efforts, such as a 200 CFM compressor energy saving project and the introduction of eFans in AHUs, are yielding significant annual savings. The company's ESG leadership was recognized at IIT Madras, and it received a total of 4 national, 4 regional, and 9 state-level awards across various industry forums for operational excellence and innovation.

India-EU Free Trade Agreement Impact

ZF Group views the signing of the India-EU Free Trade Agreement as a crucial step towards an integrated economic zone, strengthening trade relationships. This agreement is expected to unlock significant opportunities for technology innovation and advance future mobility technologies. It will also enable ZF to contribute to more resilient and diversified value chains, reinforcing India's position as a strategic engineering hub for ZF globally.

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