ZF Commercial

The Indian economy demonstrated strong momentum with GDP expanding by 7.8% in Q3 FY26, with the full-year growth estimate revised upward to 7.6%. This was supported by improving consumption and sustained investment. Industrial output grew by 4.1% in FY26, driven by capital goods and infrastructure. The commercial vehicle industry saw a robust 16.5% growth in production for medium and heavy vehicle segments (>6 tons), supported by improved consumption and GST reforms. However, global geopolitical developments, particularly in West Asia, remain a challenging factor.

For Q4 FY26, ZF Commercial reported a revenue of INR 1,197 crores, a 15.2% YoY growth, marking its highest single-quarter result. Profit before tax (PBT) for the quarter was INR 196.6 crores (16.4% growth), and profit after tax (PAT) was INR 146.3 crores (15.5% growth). For the full financial year FY26, total revenue reached INR 4,302 crores, a 9.2% YoY increase, also the highest in company history. FY26 PBT stood at INR 693 crores (13.9% growth), and PAT was INR 517 crores (12.2% growth).

OE sales grew by 17.6% in FY26, outperforming the industry's 16.6% growth in vehicle production. This was driven by a strong second-half rebound, GST normalization, and improved infrastructure. The aftermarket business reported revenues of INR 151 crores in Q4 FY26 and INR 584 crores for the full year, representing a 15.6% growth compared to the previous financial year. This growth was fueled by active channel management, including outreach to over 6,000 retailers, 4,000 distributors, and 1,800 fleets.

Exports of goods recorded a decline of 11.1% YoY in FY26, totaling INR 1,025 crores, primarily due to U.S. tariffs and geopolitical disruptions. However, export of services showed strong growth, increasing by 15.4% in FY26 to INR 509 crores, driven by engineering activities from India to global centers. Management anticipates moderate improvement in export demand, especially from the U.S. market, which has shown an uptrend in production over the last four months.

The company accelerated the ramp-up of hydraulic and pneumatic ESC and expanded e-compressor supplies for the domestic market. New product launches included exhaust brake valve, OPL compressor with power reduction features, and EBS/eCars for EV buses. ZF is also focusing on higher penetration of advanced trailer technologies like trailer ABS and EBS, in line with AIS-113 regulations, and expanding its EV portfolio with e-compressors and EBS systems for independent bus manufacturers.

The Board of Directors approved a bonus issue in the ratio of 5:1, meaning 5 new shares for every 1 held, with a record date of June 24, 2026. Additionally, a final dividend of INR 4 per equity share was recommended for FY26, with a record date of July 10, 2026. For FY27, the company anticipates a capital expenditure of approximately INR 180-190 crores, allocated for new products, replacements, and regular upgrades.

Q4 FY26 saw a 230 bps Q-on-Q decline in profit before tax margin. This was primarily attributed to increased material costs, particularly aluminum, which rose by approximately 18% (from INR 233/kg to INR 274/kg), and a salary increase effective January 1st. Management noted that conversations with customers for cost recoveries are ongoing, but there is a lag. The outlook for FY27 margins is cautious, expected to be flattish with possibly small single-digit growth due to macroeconomic uncertainties.