Precision engineering play with strong growth outlook…
About the stock : RACL Geartech Limited (RACL) is an auto ancillary player manufacturing high-precision automotive components (gears, shafts, etc.)
• Geography Mix (FY26): Europe ~69%; India & Asia pacific ~29%, USA -2%.
• Category Mix (FY26): 2W- 30%, CV- 20%, PV- 13%, ATV/RTV – 18%
Q 1FY2 7 Results: RACL reported healthy results. On a consolidated basis, topline for the quarter came in at ₹ 132 crores, up by ~31.5% YoY. EBITDA for Q1FY27 came in at ₹32 crores, with EBITDA margins at 24.1%, up ~190 bps QoQ. PAT in Q1FY27 stood at ₹9 crores (up 8% YoY) affected by lower other income & higher tax incidence.
Investment Rationale:
• Multi – Year Growth Visibility from New Program Ramp – Ups : 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. It is entering a strong multi-year growth phase, supported by the ramp-up of recently won programs and recovery across key customers. KTM volumes have recovered to around pre-COVID levels, while the BMW Project Venus is nearing commercialisation, with final sign-off expected in October 2026 and commercial supplies likely from October-November 2026. The Royal Enfield program is already ramping at ~7,500–8,000 sets/month, with the company targeting higher volumes as demand sustains. Additionally, the upcoming ZF electric power steering program, expected to commence commercial supplies by late FY27/mid-FY28, provides another meaningful growth leg. With management targeting 15–20% sustainable annual growth and aiming to potentially double revenue over the next 3–4 years, the company appears positioned for sustained earnings compounding rather than one-off growth. We bake in 18% sales CAGR over FY26-28E.
• Strong Export Franchise and Strategic Capex to Strengthen Competitiveness and Support Scale – Up : RACL’s export business remains a key competitive advantage, accounting for ~75% of sales, with Europe contributing nearly 69% of overall business. The company’s critical transmission and engine components are generally single sourced at the individual product level by global OEMs, enabling RACL to remain the sole supplier through the life of a vehicle program. Additionally, RACL is undertaking ₹77 crore of FY27 capex, with ~₹40 crore allocated toward replacement/modernisation of its ageing heat-treatment infrastructure and ~₹30–35 crore toward incremental capacity. Alongside the core automotive business, the company is also incubating opportunities in aerospace, actuators, robotics, defence and industrial components, providing longer-term optionality beyond traditional automotive business.
Rating and Target Price
• RACL is a precision engineering company with strong multi-year revenue visibility alongside a healthy export franchise with robust orderbook targeting ₹1,000 crore sales over next 4-5 years. We maintain our positive view and assign BUY rating on RACL & value it at ₹ 2,000 (30 x P/E FY28)
