Buy Nuvoco Vistas Corp Ltd for the Target Rs.560 by Choice Broking Ltd
De-bottlenecking: Another Positive Trigger
We maintain our BUY rating on NUVOCO with an increased target price of INR 560 (vs INR 480 earlier post Q1FY26 results) as we factor in: 1) The proposed capacity addition of 4 MTPA by FY27 end via de-bottlenecking at a nominal outlay of INR 2Bn that takes total capacity to 35 MTPA, 2) Marginally higher volume, realization, EBITDA per ton and EBITDA assumptions (Exhibit 2) mostly due to continued sector tailwinds (positive demand & pricing scenarios) and also due to reassurance on aspects like the ongoing cost saving (INR 50/t in FY26E) and premiumization initiatives, 3) Marginally higher EV/CE multiple of 1.6x to factor in ROCE expansion (by 80/230 bps in FY27E/28E) on the back of reasons highlighted above. We continue to like NUVOCO’s capital structure with high debt level of 2.0x of EBITDA and impressive ROCE expansion by 1,200bps from 3.9% in FY25 to 15.9% in FY28E (vs 13.5% earlier) on the back of strong business fundamentals highlighted above. NUVOCO continues to be amongst our top picks in the cement sector since May 2025
We forecast NUVOCO’s EBITDA to grow at a CAGR of 31.4% over FY25-28E based on our volume growth assumptions of 6.0%/8.0%/10.0%, and realisation growth of 6.0%/1.0%/1.0% in FY26E/27E/28E, respectively. We like NUVOCO’s focus on premiumization and trade share for a better pricing scenario, expansion plan towards the new western region via the acquisition of Vadraj Cement & its focus towards cost reduction.
We arrive at a 1-year forward TP of INR 560/share for NUVOCO. We value NUVOCO on our EV/CE framework – we assign an EV/CE multiple of 1.6x/1.6x for FY27E/28E. We do a sanity check of our EV/CE TP using implied EV/EBITDA multiple. On our TP of INR 560, FY28E implied EV/EBITDA multiple is 8.6x, which makes NUVOCO amongst the cheapest mid to large-sized cement companies in our coverage.
EBITDA/t expected to reach INR 1,069/t in FY26E with the support of the project SPRINT & project BRIDGE
NUVOCO is targeting ~INR 50/t cost savings in FY26E through multiple initiatives: 1) Ramping up slag usage from 45,000 to 75,000 t/month, 2) Upgrading Nimbol WHRS from 4.7 MW to 6.6 MW (with ~INR 100 Mn capex), 3) Increasing AFR usage to 15-16% from 12%, 4) Setting up hybrid wind-solar power in the North, 5) Reducing lead distance by 12-15 km, and 6) Commissioning the Odisha railway siding for 100% clinker movement to Jaipur by Q3. We expect these initiatives will lead NUVOCO to increase its EBITDA/t above INR 1,000/t in FY26.
Risk to the thesis:
Risk in Vadraj Acquisition Financing: INR12 Bn bridge loan hinges on timely conversion into equity-like instruments and securing partners. Challenge in Sustaining Cement-to-Clinker Ratio: Nuvoco’s C/K ratio of 1.74 may face pressure post-Vadraj, as Gujarat’s OPC-heavy market limits scope for high blending, making the 1.75 level hard to sustain long-term. Regulatory and Demand-Side Risks: Potential hikes in state levies on limestone and slowdown in government spending on infrastructure pose risks to cost structure and demand visibility.
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