RACL had quite an interesting call, they have been able to develop and win orders for new products from new customers. FY24 growth will likely be ~15% due to execution issues, but orders are secured and once these issues normalize, growth should improve. Concall notes below.
Sales slowdown
- Got stuck on a gear grinding process (first time in India), this affected production for MAN trucks, which is now getting resolved. They have 3 gear grinding machines and 3 more are in order (2 in transit that cost 20 cr.)
- Faced some issues with ramp-up with ZF as order started during COVID and this was their first time catering to 4-W. Issues have now been sorted
- Europe has faced slight slowdown, but they have many product categories and new orders that should propel growth
- Sales will grow at 15% in FY24, lower than 25-30% due to these short term issues
Customer specific
- BMW R1200 (city top selling bike): 10% YOY growth in this bike. New version (R1250) value addition is again higher (shelf life is until 2033)
- KTM has a JV in China, through which they are selling good numbers, and gear is supplied from non-Chinese suppliers (20-25k bikes)
Capex
- 95-96 cr. revenues from Gajraula plant
- Noida plant expansion: will be operational by next month. Earlier was only catering to domestic market but in January will have a new product line (German premium e-bicycle product manufacturer, 5-7k Euro, will supply entire gearbox assembly, patented technology by customer, got this order because cost of manufacturing in Europe became very high). Supplies will start in January 2024
- China procured 50 gear grinding machines (booked until 2026) and RACL could barely get 2
- FY24 capex: 80 cr. budgeted capex and have spent 50 cr. in H1FY24
New projects
- E-bicycle gearbox for German customer, painting process for BRP, wheel axle for KTM
- Painting process for BRP, put up a dedicated paint shop (1.5 cr. expense), will be supplying to Canada for first time (will start in Q1FY25)
- KTM will use their wheel axle in their superbike (will start in Q1FY25)
Margins
- Doing forging inhouse improves margins
- In new products, gross margins are higher
Disclosure: Invested (position size here, no transactions in last-30 days)