Small cap stock Rolex Rings has received a bullish initiation from InCred Equities, which believes the auto component and bearing-ring maker is moving from a prolonged period of muted growth into a fresh operating upcycle.
The brokerage initiated coverage with a Buy rating and a target price of ₹251, implying an upside of 28% from the last trading price of ₹196.36.
The brokerage’s thesis rests on the view that the company’s flat revenue performance over FY22-FY26 was largely driven by temporary demand and external disruptions rather than deterioration in its underlying franchise.
InCred expects a recovery to be supported by improving US auto component exports, increasing European business through China+1 sourcing and rising domestic demand for bearing rings. The company also has significant spare capacity, allowing higher volumes to translate into stronger profitability without requiring a proportionate increase in capital expenditure.
“We value Rolex Rings at 25x PE on FY28E EPS of 10.05 arriving at a Target Price of INR 251. Our multiple is anchored on (i) a ~22%
EBITDA CAGR through FY26-28E, (ii) operating EBITDA margin recovering from 20.1% in FY26 to 22.5% by FY28E, (iii) a debt-free, cash-generative model with INR 367 Cr of net cash and utilisation headroom that funds growth without capex, and (iv) a customer list where seven of the top ten have been in place for over fifteen years, the brokerage said in its report.
The stock ended 3.3% higher at ₹196.36 per share on NSE on October 1. Indian stock markets are closed today on account of Gandhi Jayanti. The stock rose 10% in the last 1 month, 31% in the last 3 months, 66% in 6 months and 51% in the last 1 year.
Why InCred is bullish on Rolex Rings
InCred’s first major argument is that the company’s four-year period of relatively weak revenue growth should be viewed as cyclical rather than structural. Revenue grew at a 3% CAGR between FY22 and FY26, while higher US tariffs, a temporary shutdown at a large US customer and weak European industrial demand affected exports.
The brokerage noted that Rolex did not lose customers or approvals during this period and continued to secure new programmes. Domestic bearing-ring revenue increased 17% to ₹386 crore in FY26, while European revenue rose around 25%.
“US auto component exports are back on track, up 31% YoY in Q1 FY27, and the largest US customer is close to its FY25 run-rate. In Europe, China+1 sourcing is turning into business, with European revenue up ~25% in FY26,” InCred said.
The recovery is already visible in the company’s operating numbers. Auto component exports increased 31% year-on-year in Q1 FY27, while EBITDA margin improved to 22.6%. July 2026 was also the company’s highest revenue month on record. Management has guided for mid-teens revenue growth in FY27 and close to 20% in FY28.
Domestic bearing rings provide a third growth avenue. The five major bearing players account for around 80% of India’s bearing market and are increasingly moving away from captive forging towards precision assembly. As an approved supplier to all five major players, Rolex is positioned to capture additional volumes as those companies expand and localise their operations.
Capacity is another part of the investment case. Rolex operated at only 60-65% utilisation in FY26, while InCred estimates it can generate ₹1,550-1,650 crore of revenue at around 85% utilisation without significant greenfield capex.
“Utilisation was 60-65% in FY26. On our estimates Rolex can carry INR 1,550-1,650 Cr of revenue at ~85% utilisation without material greenfield capex. Maintenance capex has run at INR 42-55 Cr against operating cash flow of INR 190-227 Cr,” the brokerage said.
The balance sheet further strengthens the case. Rolex Rings ended FY26 with ₹367 crore of cash and investments and no borrowings after settling its ₹101 crore Right of Recompense obligation. It also completed a ₹180 crore buyback of 1 crore shares at ₹180 apiece, with the promoter group not participating.
Estimates and target price
InCred expects Rolex Rings’ revenue to rise from ₹1,143 crore in FY26 to ₹1,299 crore in FY27E and ₹1,531 crore in FY28E. This translates into growth of 13.6% and 17.9%, respectively.
EBITDA is estimated to increase from ₹230 crore in FY26 to ₹281 crore in FY27E and ₹344 crore in FY28E. EBITDA margin is expected to improve from 20.1% to 21.6% and then 22.5% over the same period.
PAT is projected to rise from ₹141 crore in FY26 to ₹202 crore in FY27E and ₹264 crore in FY28E. EPS is estimated at ₹5.19, ₹7.55 and ₹10.05, respectively.
“We forecast revenue/EBITDA/PAT to grow from FY26 to FY28E at a 16%/22%/37% CAGR, driven by the recovery in US auto component exports, European nominations converting to production, and domestic bearing ring strength,” InCred said.
InCred said its valuation also reflects the company’s expected margin recovery, net-cash position and ability to grow without significant balance-sheet leverage.
“Operating EBITDA margin recovers from 20.1% to 22.5% on fixed cost absorption at rising utilisation. Adjusted PAT grows slower than EBITDA because other income steps down as the buyback removes roughly half the treasury balance,” the brokerage said.
The brokerage, however, flagged risks including the possibility of renewed US tariff pressure, customer concentration, inflation and execution challenges. The top five customer groups account for around 65-70% of revenue, while Q1 FY27 revenue growth was limited to 4% partly because of a labour shortage.
Rolex Rings is one of India’s five largest forging companies and supplies bearing rings to major players including SKF, Schaeffler, Timken, NEI/NBC and NRB. It also supplies automotive components to global Tier-1 customers such as Allison Transmission and Magna/Getrag.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
