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Nuvoco Vistas Ltd. Q1FY25 volumes came at INR4.8mnt, down 9.4% QoQ and 4.0% YoY, impacted due to monsoon and general election. Revenue for quarter came at INR26,365mn, down 10.1% QoQ and 6.0 YoY. EBITDA/t for the quarter came at INR715/t, down 29.9% QoQ and 8.9% YoY. The decline in EBITDA/t was mainly led by lower realization. Adjusted PAT for quarter stood at INR28mn vs INR1,003mn in Q4FY24. EPS for Q1FY25 was INR0.1. Trade share came at 73%, with premiumization reaching at 40% of trade volumes.

*  Capex Plan: In FY25E, the company has allocated a total Capex of INR 4,000mn, primarily to complete the brownfield expansions initiated last year. Of this amount, the company spent INR 1,000mn in Q1, with the remaining expenditure expected to be completed over the 9MFY25. The railway siding projects are in advanced stages of completion, with the Soadih project expected to be commissioned in Q2FY25E and the Odisha project by Q3FY25E. Looking ahead to FY26E, the company plans to allocate approximately INR 2,000mn for sustaining Capex and around INR 7,000mn for development Capex and new factory Capex. The company's initial priority for FY26E is to expand in North Stoke and add an additional line of brownfield expansion at the Chittorgarh Plant. The second priority is to focus on limestone reserves in Rajasthan and Nagaur.

*  Prices are expected to recover in Q3: Realization for the quarter stood at INR 5,498 per ton, down 0.8% QoQ and 2.1% YoY. Nuvoco's NSR/t experienced the lowest drop in the industry compared to all peer group companies on both a QoQ and YoY basis. During Q1FY25, Pan-India cement prices declined by 1% QoQ, with prices in the North and East regions decreasing by 2% and 2.4% QoQ, respectively. Management anticipates that prices will remain under pressure until the monsoon season ends, with a potential recovery expected in October.

*  Total cost/t came at INR4,777/t: COGS/t for the quarter came in at INR1,093/t, down 1.2% QoQ but up 20.3% YoY. The QoQ decline in COGS was primarily due to long-term agreements with raw material suppliers, which have allowed the company to maintain a favorable position in slag supply. Power and fuel costs/t were INR 1,072/t, up 7.0% QoQ but down 13.8% YoY. The YoY decline in power and fuel costs was driven by a lower blended fuel cost, which stood at INR 1.57/Mcal compared to INR 1.63/Mcal in Q4FY24. The company is aiming for further reductions in power and fuel costs by increasing the use of Waste Heat Recovery Systems (WHRS) and Alternative Fuels and Raw materials (AFRs). Freight expenses/t for the quarter were INR 1,480/t, down 2.6% QoQ and 9.6% YoY. The reduction in logistics costs was mainly due to a decrease in lead distances, which fell to 332 km from 340 km. The company is targeting further reductions in lead distance, and additional cost-saving initiatives under Project Bridge are on track

*  Outlook and Valuation: The recovery in demand is expected to hinge on increased spending in infrastructure and housing, with key drivers including a 57% hike in the PMAY budget for FY25E, the acceleration of the Purvodaya Mission for comprehensive development in the eastern region, and the execution of INR260bn in highway development projects in Bihar. Alongside these factors, the company is focused on cost reduction initiatives aimed at increasing EBITDA/t, with prices anticipated to normalize post-monsoon. We expect Revenue/ EBITDA to grow at a CAGR of 5.0%/15.5% respectively over FY24-FY26E. Our target EV/EBITDA multiple is 8.0x on FY26E EBITDA, hence we ascribe a target price of INR373, upgrading our rating to BUY.

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