Well poised to capitalize on expanding opportunities…
About the stock: Rossell Techsys (RTL) is an aerospace and defence engineering and manufacturing company. The company’s competencies span across electrical wiring and interconnect systems, electrical panel assemblies tailored for power distribution and control, electronic systems. The company conducts business in two primary models: BTS and BTP.
• Consolidated revenue of the company has grown by ~50% CAGR during the period FY24-26 while EBITDA and PAT have grown by ~40% CAGR respectively over the same period
Investment Rationale
• Large and growing opportunity across aerospace electrical systems: RTL operates across EWIS, ESSI, ATE and Electrical-MRO markets with an annual potential opportunity of US$70bn+. The company is expected to benefit from rising aerospace production, increasing defence spending and growing electronics content across aerospace and defence platforms. Additionally, Boeing, Honeywell Aerospace and Lockheed Martin collectively possess over US$ 270bn of visible defence backlog and demand. Management indicated that EWIS and Electrical Panel Assemblies (EPA) together account for approximately 6-8% of the total cost of an aerospace platform providing a favourable long-term demand for qualified suppliers like Rossell.
• Increasing value addition through BTP-BTS transition and higher content per platform: Rossell is strategically transitioning from a predominantly Build-to-Print (BTP) business towards higher-value Build-to-Specification (BTS) and systems integration opportunities. Management indicated that nearly 95% of current business is BTP, providing significant scope for value addition through engineering-led programs. The company currently contributes only ~2-3% of electrical content per aircraft and aims to increase this to 12-15% over time, enabling higher wallet share, stronger customer collaboration and long-term margin expansion
• Capacity expansion and demand visibility support multi-year growth: Company currently operates ~2.55 lakh sq. ft. of manufacturing space and is expanding capacity through an additional leased facility of ~2.1 lakh sq. ft., with further expansion plans under evaluation. Growth visibility remains strong, supported by a confirmed order book of ~₹715 crore, strategic agreements exceeding ₹3,500 crore and a bid pipeline of over ₹4,500 crore. The combination of expanding capacity and a robust opportunity pipeline positions the company well to support its long-term growth aspirations
Rating and Target Price
• We believe that RTL is strongly positioned to capture strong opportunity from global commercial and defence ecosystem. With strong order inflows, improving contract mix, expanding product portfolio and improving execution and continuous order flows, we estimate revenue & PAT CAGR of ~61% & ~158% respectively over FY25-28E
• We recommend BUY on RTL with a TP of ₹1240 (valued at 32x P/E on FY28E)
