1. At a Glance
This is the company that literally makes things stop moving… except its own earnings. Operating under the ZF WABCO brand, ZF Commercial is India’s big daddy in advanced braking systems for trucks, buses, and heavy-duty vehicles. Q1 FY26 was another demonstration of German engineering + Indian cost control — revenue steady, profits cruising, and OPM still in the high teens. But the stock’s P/E at 53.8 says investors think it’s the automotive equivalent of a Gucci handbag: you’re paying more for the brand than the material.
2. Introduction
Imagine a world without brakes. No red lights, no speed limits, and your uncle’s truck full of onions careening downhill at 80 km/h. That’s the alternate reality ZF Commercial is saving us from. Headquartered in Chennai, it sits comfortably in theZF Group’s global empire, churning out conventional and advanced braking systems, air suspension, e-mobility tech, and enough acronyms to fill an engineering textbook.
Over the last decade, it has gone from a “nice-to-have” component supplier to amission-critical safety partnerfor OEMs. The best part? They’ve done it while staying debt-free. The not-so-best part? Valuations high enough to make even Nifty50 stocks blush, and a recent promoter stake cut from 63.16% to 60% — a small but noticeable move.
Still, the company’s 27% CAGR profit growth over 5 years suggests they’re not here to coast. If the Indian CV market keeps growing, ZF is in for a long highway drive with minimal traffic.
3. Business Model (WTF Do They Even Do?)
ZF Commercial manufactures and sells:
- Advanced Braking Systems– ABS, EBS, ESC for trucks & buses.
- Conventional Braking Products– Air-assisted brakes, compressors, actuators.
- E-Mobility Products– e-compressors, electronic air suspension.
- Services– Aftermarket spares, retrofits, diagnostics, driver training.
The business split is OEM-heavy,
but the aftermarket segment gives it recurring, high-margin cash flows. In short, it’s a razor-and-blade model — sell the braking systems to OEMs, then keep making money through maintenance parts for decades.
4. Financials Overview
| Metric | Q1 FY26 | Q1 FY25 | Q4 FY25 | YoY % | QoQ % |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 963 | 938 | 1,003 | 2.66% | -3.99% |
| EBITDA (₹ Cr) | 128 | 138 | 172 | -7.25% | -25.58% |
| PAT (₹ Cr) | 120 | 99 | 125 | 21.13% | -4.00% |
| EPS (₹) | 63.36 | 52.30 | 66.00 | 21.13% | -4.00% |
Commentary:Margins dipped in the quarter (OPM down to 13%), likely due to product mix and cost pressures. But PAT still grew YoY thanks to a 67 Cr windfall in other income — possibly currency gains or investment income.
5. Valuation (Fair Value RANGE only)
Method 1 – P/E:
- EPS TTM = ₹252.86
- Industry P/E median ≈ 45x.
- FV range via P/E = ₹11,300 – ₹13,800.
Method 2 – EV/EBITDA:
- Debt-free, so EV ≈ Market Cap = ₹25,824 Cr.
- TTM EBITDA = ₹615 Cr → EV/EBITDA ≈ 42x.
- Reasonable range (industry ~30–40x) = ₹18,500 – ₹24,600 Cr.
Method 3 – DCF:
- Assume 14% CAGR profit growth, WACC ~10%, terminal growth 4%.
- FV range ≈ ₹12,000 –
