RACL had a wonderful concall today where they shared more about their new customers, technology and products. Concall notes below.
New projects
FY23Q2
- Core competency: Gear cutting, laser welding and cutting which differentiates them from peers. Very good with concurrent R&D. Work with customers in design phase to see how it can be scaled to manufacturing
- ZF car parts: Electro mechanical roll control, rear steering. Have introduced a new technology
- E-mobility (recently started commercial production)
- 3-wheelers (dying business)
- Centrally air controlled plant, clean room with no dust accumulation on machines|
- European market grew for RACL (ZF started in June)
- Put up capacity with 3 year growth in mind for newer customers which was fully booked by the customers. These capacities are already operating at 70% utilization. Overall, operating at 75% utilization
- New project with ZF (not modeled before). This was earlier being manufactured by ZF
- ZF is confident that steering shafts using actuator for rear steering will be widely adopted beyond Porsche. If that happens, RACL’s parts will flow into them
- Bagged one more order from ZF for BMW for one part (high volume: 700K units per year)
- Domestic launch of a new 440 cc Italian bike: RACL is the exclusive supplier to them
- Have surplus land and are putting up another plant. Building will be finished by March/April 2023
- Revenue recognition policy: Recognized once its handed over to logistics partner in Delhi. Work on FOB
- One major project under discussion which can be a game changing (luxury car manufacturer through ZF for an electric vehicle, high volume product)
- Higher inventory: Large number of SKUs as parts are small in volume but high in realizations
- Debt equity is around 1x, still below peak allowable of 1.5x
- Optimum utilization is around 2x fixed asset turns
- Geographical Segmental shifts: North America: no new projects, Asia Pacific: should increase a bit due to newer projects and same for Europe
- Most raw materials (95%) are procured domestically
- Don’t have enough bandwidth to scale up industrial customers
Disclosure: Invested (position size here, no transactions in last-30 days)