Buy ZF Commercial Vehicle Control System With Target Price of Rs. 12,160: ICICI Direct

The latest report released by ICICI Direct, one of the leading brokerage firms in India, gives a buy call to a mid-cap technology company ZF Commercial Vehicle Control System (ZFCV). The company's stock is in strong upside momentum with a clear uptrend and has been moving to the upside for the past few months. ZFCV has the potential to move more than 19% from the current market price, says ICICI Direct report.

Here is a detailed breakdown of the latest report of ICICI Direct.

Outlook of ZF Commercial Vehicle Control System (ZFCV)

The company operates under the ZF WABCO brand, and it is the market leader for conventional braking products, advanced braking systems, and other related air-assisted technologies in India. In addition, the company is also known for providing software development services.

The current market price of ZFVCS is Rs. 10,175, and the stock's market capitalization is Rs. 19 292 Crores. The stock is on strong momentum and can potentially breach the target of Rs. 12, 160 according to the report of ICICI Direct.

Current Valuation and Company Outlook

According to reports of ICICI Direct, "ZF Commercial Vehicle Control Systems India (ZFCV) (erstwhile Wabco India), now part of the ZF Group, is the market leader in the CV braking space and a technology-focused complete solutions provider."

Further on the valuation, the report says, "With FY22 being the first year of the upcycle, considerable double-digit M&HCV volume growth is expected over FY23E, FY24E with industry volumes seen surpassing their FY19 peak some time in FY25E".

Buy Call of ICICI Direct on ZFCV

"ZFCV share price has grown at ~12% CAGR from Rs. 5,640 in September 2017, outperforming Nifty Auto index in that time. We retain BUY on ZFCV amid a cyclical upswing in CV space with ZFCV a key beneficiary, solutions in EV domain and advance technologies supporting its quest for content/vehicle increase," says the report decoding their buy call. Summarizing the report in one sentence with the heading ICICI report says, "New tech offerings to ensure industry-leading growth."

Key Triggers for good performance of the stock in the near future

There are two key triggers mentioned in the ICICI Direct. The report says,

• "Amid cyclical recovery, we build ~29.8% sales CAGR over FY22-24E.
• With potential kit value pegged at ~3x from current levels of ~| 45,000- 48,000/unit along with input cost cooling off and premium product offering, margins are seen inching up to the 15% mark by FY24E."