RACL Geartech's export franchise and programme ramp-ups underpin multi-year growth

Investment View and Valuation

In its August 26, 2026 company update on RACL Geartech Limited, ICICI Securities Retail Research maintained a BUY rating and valued the company at Rs 2,000 per share, based on 30 times FY28E P/E.

The broker’s positive view is based on multi-year revenue visibility from new programme ramp-ups, recovery at key customers, a strong export franchise and strategic capacity investment. ICICI Securities describes RACL as a niche global supplier of high-precision, safety-critical automotive components, including gears and shafts, focused on premium and complex applications.

Q1 FY27 Financial Performance

RACL reported healthy consolidated Q1 FY27 results. Total operating income increased 31.5 per cent year-on-year and 0.5 per cent sequentially to Rs 132.4 crore. EBITDA rose 69.7 per cent year-on-year to Rs 31.9 crore, with EBITDA margin expanding to 24.1 per cent from 18.7 per cent in Q1 FY26 and 22.2 per cent in Q4 FY26.

Reported PAT was Rs 8.9 crore, up 7.7 per cent year-on-year but down 27.9 per cent sequentially, affected by sharply lower other income and higher tax.

Programme Ramp-ups and Customer Recovery

• KTM: Volumes have recovered to around pre-Covid levels, with model-year 2027 production expected at normal to slightly above-normal levels. RACL has supplied KTM Austria from India for about 15 years and is receiving new business opportunities for KTM’s upcoming models.
• Royal Enfield: The 350cc programme began commercial supplies in January and was operating at about 7,500 to 8,000 motorcycle sets per month, against an initial nomination of roughly 10,000 sets.
• BMW Project Venus: The programme has completed Level-1 PPAP approval and conditional pilot shipments for customer vehicles. Management expected BMW’s final sign-off on October 24, 2026, with commercial supplies expected around October-November 2026.
• ZF: The business is recovering as the programme shifts towards the BMW X5 platform, although it was operating at only 50 to 60 per cent utilisation of installed capacity. The peak revenue opportunity has shifted to around 2030 from the earlier expectation of 2028 because of intervening delays.
• ZF electric power-steering programme: Commercial supplies are expected to begin by late FY27 or mid-FY28.

Growth Outlook and Business Positioning

Management retained its FY27 revenue guidance of around Rs 570 crore, implying about 16 to 17 per cent growth, and sees a sustainable 15 to 20 per cent growth trajectory. It noted that no individual customer contributes more than roughly 15 to 20 per cent of revenue.

Exports account for about 75 per cent of sales, with Europe contributing about 69 per cent of overall business in FY26. ICICI Securities considers RACL’s single-source position for individual critical transmission and engine components with global OEMs an important competitive advantage, as the company can remain the supplier through a vehicle programme’s life.

Capacity Investment and Diversification

RACL plans Rs 77 crore of FY27 capex, including about Rs 40 crore for replacement and modernisation of ageing heat-treatment infrastructure and Rs 30 to 35 crore for incremental capacity.

The company is also evaluating longer-duration non-automotive opportunities in civil aerospace, actuators, humanoid robotics, defence and industrial applications.

ICICI Securities’ Financial Estimates

The broker builds in an 18 per cent sales CAGR for FY26-FY28E. Its estimates project sales to rise from Rs 489.9 crore in FY26 to Rs 580.0 crore in FY27E and Rs 684.4 crore in FY28E. EBITDA is forecast to increase from Rs 106.9 crore to Rs 157.4 crore, with margin improving from 21.8 per cent to 23.0 per cent. PAT is projected at Rs 61.3 crore in FY27E and Rs 79.1 crore in FY28E.

Key Risks

• Slower-than-anticipated FY26-FY28E sales growth due to delays in customer projects.
• Lower-than-expected margin gains amid volatile raw-material costs.