Strong orderbook driving sustained growth ahead
About the Company: RACL Geartech Limited (RACL) is an auto ancillary player manufacturing high-precision automotive components (gears, shafts, etc.).
• Geography Mix (FY25): Europe ~52%; India & Asia pacific ~46%
• Category Mix (FY25): 2W- 39%, CV- 17%, PV- 13%, ATV/RTV – 13% Q3FY26 Result: On a consolidated basis, topline for the quarter came in at ₹ 137 crores, up by ~22% YoY. EBITDA for Q3FY26 came in at ₹31 crores, with EBITDA margins at 22.8%, up ~250 bps QoQ. PAT in Q3FY26 stood at ₹16 crores (up 148% YoY). Exports constitute 70% of its sales for the quarter.
Investment Rationale:
• Premium Order Book with Multi-Year Revenue Visibility: RACL Geartech has evolved from a small domestic gear manufacturer into a niche global supplier of precision engineered, safety critical automotive components focusing on premium & complex parts. The Q3FY26 performance highlights clear earnings acceleration, with 22% YoY revenue growth and nearly 23% EBITDA margins. Management has guided ~15–20% growth for FY27, supported by visible program ramp-ups including BMW EV components, domestic premium 2-W client breakthrough (expanding production from 10,000 to 20,000 units due to high demand), and gradual KTM recovery. With partial contribution from new programs in FY27 and fuller impact in FY28, the company appears positioned for sustained earnings compounding rather than one-off growth. These wins ensure multi-year revenue visibility targeting ~₹1,000 crores sales by FY29-30E
• KTM partnership: growth revival and strategic upside: KTM has been a long-standing premium customer for RACL, contributing ~15% to the annual revenue. After a brief production halt in FY25 due to restructuring, the business outlook has improved following Bajaj auto’s capital infusion and takeover. KTM’s resumed production and deepened India-Europe supply chain synergies after India-EU FTA means RACL’s supply of transmission gears and drivelines parts is set for a strong rebound. KTM’s dealer-level stock has normalized, indicating that old inventories are cleared and company now aptly poised for better production days ahead.
• Strategic Capex Strengthening Long-Term Competitiveness: RACL has recently announced an ambitious capex plant amounting to ~₹77 crore for FY27E, largely focused on upgrading heat treatment facilities and selective capacity expansion. It is aimed at improving efficiency rather than just adding volume. The transition from LPG to electric-based systems is expected to reduce operating costs. These initiatives reinforce RACL’s positioning in premium, export-oriented segments while supporting margin resilience and scalable growth over the next 2–3 years.
Rating and Target Price
• We are positive on RACL driven by its strategic presence in premium auto component space with strong orderbook visibility targeting ₹1,000 crore sales over next 4-5 years. Having captured the recent up-move, we maintain BUY rating on the stock & value it at ₹ 1,615 i.e. 25x P/E-FY28E.
