ZF Commercial Vehicle Control Systems India Ltd. share price target

ZF CV India’s (ZFI, formerly WABCO) Q4FY22 operating performance was a beat as EBITDA margin came in at 11.4% (up 240bps QoQ) driven primarily by operating leverage benefits. Receding RM cost pressures ahead and governmental push towards higher infra spends augur well for the company as it has a dominant share in the M&HCV braking solutions market.

Q3FY22 revenue up by 15% YoY (6% QoQ) owing to recovery in the Heavy vehicle volume. Also supported by Strong After market growth by 19%YoY. Sale from domestic OEM grew by 26%YoY. Despite higher material cost, EBITDA margin came at 9% due to superior product mix and cost control initiatives. Industry Quarter volume is currently trading at 36% lower to its historical peak in FY19, and provide significant room for growth. Wabco ZF technological advantage in the Heavy vehicle segment...

Recent announcements in Union Budget 2022-23 i.e. robust allocation of | 7.5 lakh crore (up 35% YoY) as capital expenditure for FY23E & extension of commissioning date by a year to avail concessional tax rate (~15%) for new manufacturing set-ups (stimulating private capex) is expected to...

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Q1FY22 revenue de-grew by -31% QoQ due to significant decline in the commercial vehicle volume, down by 92% YoY. This was largely due to production lockdown and lower demand globally. EBITDA margin came at 8.6% due to higher input cost and other expenses. Net profit tanked by 55% QoQ. Wabco ZF technological advantage in the CV segment will provide significant growth in product intelligence and will result in higher value enhancing offer for the domestic and global customers....

Q4FY21 revenue came with a mixed result of 76%YoY. The company outperformed the CV industry growth by 25%. Export grew by 70%YoY due to Strong global market. We expect the export momentum is likely to continue due to providing global export hub and local engineering footprint. EBITDA margin contracted by 110bps due to commodity inflation, Increase in freight cost and supply side constraints. Wabco ZF technological advantage in the CV segment will provide...

We build 32.3% sales, 74.7% PAT CAGR (latter aided by low base) over FY21-23E and believe WIL continues to offer a prime play on the impending M&HCV; revival domestically. We maintain our BUY rating, valuing WIL at | 8,020, 48x P/E on FY23E EPS (previous target price | 7,350). Strong technology support from MNC parentage & track record of outperformance...

actual policy draft is expected to be made public over the next few weeks. The ministry press release states that commercial vehicles beyond 15 years old and that fail to obtain a fitness certificate from automated fitness centres (adhering to global standards), will be de-registered and declared as end of life vehicles. In case of private vehicles, those over 20 years old, and which fail the testing or re-registration will be declared as end of life vehicles. Voluntary scrappage policy or Voluntary Vehicle-Fleet Modernization Programme (VVMP) is aimed at curbing pollution, replacing the existing fleet...

The company's status as a technology pioneer (over the years has been the first to introduce ABS, AMT, ESC, ADAS, etc, to the Indian CV market) and complete solutions provider has led to substantial outperformance vis--vis industry, translating into ever increasing content per vehicle. Nevertheless, present reading is below other large CV markets (~US$600 in China, ~US$1,000 in Brazil and ~US$1,500 in US), leaving further headroom for realisation led growth. Post-acquisition of WIL's global parent by ZF Friedrichshafen of Germany, it has become a 93.1% subsidiary of the latter....

Q2FY20 revenue came above expectation driven by resilient performance in exports (up 8%YoY) and Aftermarket by 0.6%YoY. We expect export momentum likely to continue and increase in the content per vehicle on truck owing to the new BS-VI norms. EBITDA margin expanded by 330bps to 15% due to superior product mix and lower input cost. Wabco ZF technological advantage in the CV segment will provide...