Buy Nuvoco Vistas Corporation Ltd For Target Rs.370 By Elara Capital
Near-term headwinds priced in
Nuvoco Vistas Corporation (NUVOCO IN) reported EBITDA of ~INR 5.9bn in Q4FY26, versus our and consensus estimates of ~INR 5.6bn and ~INR 5.4bn, respectively. EBITDA grew ~7% YoY and ~53% QoQ, driven by improved realization in East India and a higher contribution from premium products. In the past three months, international petcoke and thermal coal prices have gone up by ~40% and ~18% respectively. This shall hurt margins in Q2FY27. However, in terms of EV per tonne (INR), the stock remains below levels seen at the onset of the Ukraine war–led energy shock. Thus, we believe near-term headwinds are priced in. Meanwhile, the phased commissioning of Vadraj Cement (VCL) assets, along with capacity expansion in East India, is likely to enhance growth visibility and support volume expansion. Accordingly, we reiterate Buy. We lower our TP to INR 370, based on 9x March 2028E EV/EBITDA.
Volumes at multi-quarter high: Cement volume improved ~5% YoY and ~20% QoQ to ~6.0mn tonnes, despite operational challenges from rake availability and packaging material shortage in March. Cement realization rose ~3% YoY and QoQ to INR 5,036/tonne due to improved pricing in Q4FY26 in NUVOCO’s core markets (East India) and increase in the share of premium products. The share of premium products reached 43% in FY26 versus 40% in FY25. Blended operating costs fell ~2% QoQ but were up ~4% YoY to INR 4,532/tonne, primarily due to uptick in raw material cost. Blended fuel costs rose to INR 1.44/kcal from INR 1.41/kcal in Q3FY26 and may increase further in the coming quarters. Thus, EBITDA/tonne increased ~2% YoY and ~28% QoQ to INR 979, versus our estimate of INR 915.
Capacity expansion on track: Out of the total ~4.0mn tonnes capacity addition planned through process improvements and debottlenecking initiatives in East India, ~1.0mn tonnes each at Panagarh (West Bengal) and Jojobera (Jharkhand) may be commissioned by Q1FY27. The remaining ~1.0mn tonnes each at Jajpur (Odisha) and Arasmeta (Chhattisgarh) are likely to come on stream in H2FY27, supporting incremental volume growth. In addition, Vadraj Cement’s (VCL) assets may be commissioned in a phased manner between Q3FY27 and Q1FY28, further strengthening the company’s capacity base. Post these expansions, NUVOCO will scale up its cement capacity to ~35.0mn tonnes and clinker capacity to ~17.0mn tonnes, enhancing growth visibility and regional competitiveness.
Reiterate Buy with a lower TP of INR 370: For NUVOCO, we expect phased commissioning of VCL assets and the ongoing East India-focused expansions to enhance growth visibility and support volume growth. Near-term cost pressures are likely to be partly cushioned by price hikes, improving premium mix and cost efficiencies from railway siding and long-term slag tie-ups.We introduce FY29E estimates and cut EBITDA estimates by ~31% for FY27E and ~9% for FY28E, factoring in higher fuel costs amid geopolitical disruptions. So, we lower our TP to INR 370 (from INR 438). However, we reiterate Buy, as valuations factor in near-term pressures while growth from capacity additions, strong demand in East India, and margin recovery drivers remain intact. Our TP is based on 9x (unchanged) March 2028E EV/EBITDA. Sub-par demand, weak cement price and a sharp rise in fuel prices are key risks to our call.
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SEBI Registration number is INH000000933
