RACL Geartech Limited

The “Other Expenses” have increased by 4+ Cr. This is the elephant in the room (on a 7.5 Cr. PAT). We need to get clarity on this header during the conf call.

Looks decent number for Q3 overall, on margin pressure front given Other expenses are the party pooper, it would be apt to see what RACL definition of same is and which are bigger components,

Three major components make up for 60% + for other exp per AR 21 as highlighted. Power and freight are common suspects per other mfg heavy commentaries. Job work is another major one for RACL.

Mgmt will likely spell out details in concall.

Invested.

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Hi sahil, my bad, agree on the gross margin front YoY and QoQ, they have been resilient.

I had 70% GPM in my mind. If you see, FY21, they did 70%.

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Did the management planned for Conference call this quarter? I could not find any information. If it is there, kindly share.

Thanks.

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Impact seen on QoQ as well as YoY.

although not a competitor, but worth looking at how other export focussed gear manufacturers have fared.

Kudos to RACL for executing well on the growth.

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Revenue growth was impressive for RACL y-o-y and q-o-q no doubt. But something has gone wrong with Other expenses in this quarter. Detailed margin comparison of RACL and Sona below

While both have grown on gross margins and suffered on other expenses Q-o-Q, Sona has managed to cover the other expenses increase with its GM increase. RACL hasn’t been able to do that.

I hope there is a concall, Management needs to be queried on this sharp other expenses increase. Seems like they haven’t been able to pass on increased power/oil/freight costs to their customers this quarter. Stock probably over-reacted today. Concall should clarify.

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RACL concall at 4 pm, friday 11 march

Questions i am Planning to ask if given a chance in concall:

Hi,

  1. We had undertaken a 50cr capex in fy21 & were going to understand 50 cr capex in fy22. How have these capexes progressed? When do we envision for commercial revenue to start flowing from our fy21 capex & our fy22 capex?
  2. How has the commercial launch of BMW ce04 (for which we provide gears) proceeded for us? Do we see significant traction for that product in the end market?
  3. If we look at our 9Mfy22 operating margin it has been in the 21-22% operating margin range whereas it used to be around 25-26% in fy21 sep20 to mar-21. What has led to this downward pressure on our margins? To what extent are our margins affected by logistics costs/ shipping costs & to what extent are they affected by raw material or commodity inflation? Are we able to pass on these price increases to our customers?

Disc: invested, biased.

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Hi, who are competitions OF RACL Geartech? On screener it showing Amara Raja, which in battery company. Is there any company who makes gear other them Sona Comstar?

@srgupta The other listed players are GNA Axles, Automotive Axles in the listed space. These generally cater to heavy vehicle segment.

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11.03.2022 (FY22Q3 concall notes)
• Input cost inflation + freight cost + higher gas prices lead to shrinkage in EBITDA margins. Higher other expenses was mostly due to high gas prices. Also in Q3FY21 prototyping contribution was higher which led to high margins last year
• Will try to maintain 20-23% EBITDA margins
• Net debt has increased by 16 cr. over Q2
• Semi-conductor shortage had much lesser impact on their customers until now
• Ongoing capex of 50 cr. is close to fully spent
• Electric vehicles (EVs):
o Got a new order from a domestic 2-wheeler manufacturer (incumbent) that will make EV scooters (under confidentiality)
• ZF: SOP is in June 2022, have started sea shipments in March 2022. Cleared level 1 validations and will be dispatching to RACL’s warehouse in Europe
• In domestic segment, main focus is on large incumbent companies followed by newer companies who are starting up in the EV segment. However, the main focus is on getting business from incumbents
• There is no systematic trend in raw material price spurts
• Focus on lower payable days as they can get better pricing thereby increasing margins. Working capital costs are much lower than the margin benefit it brings
• Hiring: Hire freshers out of colleges, have a 2-year training program on the shop floor

Disclosure: Invested (position size here, no transactions in last 30 days)

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Link to audio recording of RACL concall held last week

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Good to see Funds taking interest.

Solidarity PMS enters RACL.

Disc : Invested at lower levels

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RACL continuously working on the technology upgradation and process improvement. Here is the list of machines/tools imported recently by RACL for capex / process improvemnt:

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