ZF Commercial Vehicle Control Systems India Limited Q3 FY25 Earnings Call Summary

Summary

ZF Commercial Vehicle Control Systems India Limited - Q3 FY 2025-26 Earnings Call Summary Thursday, February 12, 2026, 4:00 PM

Event Participants

Executives 4 M. Muthulakshmi (Company Secretary), Paramjit Singh Chadha (Managing Director), Shankar Venkatachalam (Head of OE Sales), Sweta Agarwal (CFO)

Analysts 6 Ankit Shah (White Equity), Dishant Jain (Quasar Capital), Lakshminarayanan (Tunga Investments), Mukesh Saraf (Avendus Spark), Mumuksh Mandlesha (Anand Rathi), Nirali Gopani (Unique PMS)

Financials & KPIs

Geographic & Segment Commentary

• Domestic OE Segment: Outperformed the market with 28.1% growth against industry production growth of 20.6%. Performance was driven by high EV bus production, increased ESC penetration following September 2025 regulations, and new product SOPs like exhaust brake valves.
• Aftermarket: Achieved strong growth of 19.2% YoY, reaching ₹158 crores. Growth was supported by trailer ABS/EBS retro-fitment programs for PSU oil and gas customers and the expansion of the service footprint with 7 new authorized centers.
• Exports: Faced a 10.9% decline in goods exports due to a sharp 28% volume drop in the US market caused by tariff-related cost pass-throughs. This was partially offset by 9% growth in the EU market and robust 11.1% growth in engineering service exports.

Company-Specific & Strategic Commentary

• ESC Penetration: Regulatory mandates effective Sept 2025 led to a delta increase of 3,000 ESC units in Q3 vs last year, with management focusing on localization to sustain margins.
• Low-Floor Bus Opportunity: Draft legislation for mandatory ultra-low entry buses in metros by Oct 2026 provides a potential ₹25,000-₹30,000 per vehicle opportunity for localizing ECAS (Electronically Controlled Air Suspension).
• EV Strategy: Content per vehicle in EV buses is 4x-5x higher than ICE buses, primarily due to e-compressors where ZF is a major domestic supplier meeting local content requirements.
• ADAS Development: Preparing for 2027 ADAS regulations; while currently in the proof-of-concept stage with OEMs, management noted intense pricing pressure from competitors entering from the passenger car segment.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

ADAS & ESC Pricing

• Question: What is the current content value and competitive landscape for ADAS and ESC? (Mumuksh Mandlesha)
• Answer: ESC pricing is stable at ₹20,000-₹25,000. ADAS pricing expectations from customers have dropped to nearly half of the previous ₹40,000-₹45,000 guidance due to competitors from the passenger car segment (Shankar Venkatachalam).

Margin Seasonality

• Question: What drove the significant 300 bps sequential improvement in EBITDA margins? (Mukesh Saraf)
• Answer: Q3 typically includes retrospective price amendments for the period from April to September, which creates a seasonal spike in margins during the December quarter (Sweta Agarwal).

EV Bus Opportunity

• Question: Is ZF a near-monopoly in e-compressors for EV buses? (Ankit Shah)
• Answer: ZF is a major supplier fulfilling local content liabilities, though some competitors like Bitzer and Valeo exist via imports. Content in EV buses is significantly higher than ICE counterparts (Paramjit Singh Chadha).

Export Headwinds

• Question: How are you placed regarding the decline in US exports? (Dishant Jain)
• Answer: While US volumes saw a 28% drop, the EU market grew 9%. The recent India-EU FTA is seen as a significant long-term opportunity, though current US tariff impacts remain volatile (Sweta Agarwal).

Key Takeaway

ZF Commercial Vehicle Control Systems India delivered a record-breaking performance in Q3 FY26, with revenue crossing the ₹1,100 crore mark for the first time. The company successfully outperformed the domestic commercial vehicle industry growth by 7.5%, largely driven by regulatory tailwinds in ESC penetration and a 19.2% surge in aftermarket sales. While exports faced significant headwinds due to a 28% volume decline in the US market, the robust 11.1% growth in engineering services and the signing of the India-EU FTA provide a structural hedge. Strategically, the company is pivoting toward localization of high-value components like ECAS and e-compressors to capture the 4x-5x content increase in the burgeoning EV bus segment. Despite intense pricing competition in the upcoming ADAS market, management maintains a positive outlook supported by infrastructure spending and a buoyant domestic CV cycle.