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Hidden Gem: RACL Geartech Ltd (CMP: ₹ 1,510, Rating: BUY; Target Price: ₹ 2,000; Upside: 33%)

ICICIdirect Research 28 Aug 2026 DISCLAIMER

RACL Geartech Limited (RACL) is an auto ancillary player manufacturing high-precision automotive components (gears, shafts, etc.)
For FY26, 75% of RACL sales came from exports, wherein Europe accounted for 70% of the sales.
While 30% of the sales came from 2W segment, CV accounted for 20%, ATV/recreational vehicles 18% & PV for 13% of the total sales.
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, which is a key customer contributing 15-20% of the revenue, 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.  
RACL is also undertaking ₹77 crore of capex in FY27, with ~₹40 crore allocated toward replacement/modernisation of its ageing heat-treatment infrastructure and ~₹30–35 crore toward incremental capacity.
With larger share of exports and shift towards low-volume, high value parts, RACL maintains one of the highest margin profiles in auto ancillary space ranging between 20-25%
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.
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.
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 have a positive view on RACL and have BUY rating on the stock valuing it at ₹ 2,000 i.e. 30x PE on FY28E

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