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Margin recovery on cards 

Nuvoco Vistas Corporation (NUVOCO IN) reported EBITDA of ~INR 3.84bn in Q3FY26, broadly in line with our estimate of ~INR 3.8bn but ~7% ahead of Bloomberg consensus estimate of ~INR 3.6bn. EBITDA grew ~49% higher YoY, driven by improved volumes and better realizations, supported by a higher share of premium products. While festival-related disruptions in mid-January may have briefly slowed demand, momentum has picked up since December and is expected to strengthen further amid the peak construction season, supporting near-term volume growth. The price hike in January 2026 should act as a key near-term performance driver, while phased commissioning of Vadraj Cement (VCL) assets and capacity expansion in the East should enhance long-term growth and volume visibility. Given the positive outlook and correction in stock price, we upgrade NUVOCO to Buy from Accumulate with an unchanged TP of INR 438, based on 9x March 2028E EV/EBITDA.

Realizations strained but lower fuel cost cushions margin: Cement volume improved ~7% YoY and ~16% QoQ to ~5.0mn tonnes, marking the first double-digit QoQ growth in FY26, driven by ~20% volume growth in December. Cement realizations rose ~5% YoY but fell ~5% QoQ to INR 4,912/tonne, largely due to weak pricing in its core markets of East India amid heightened GST surveillance. The YoY improvement in realizations was driven by premiumization, with premium trade share increasing to 44% in Q3FY26 from 39% in Q3FY25. The adverse impact of weaker realizations was partly mitigated by lower-than-expected operating cost. Blended operating costs fell ~5% QoQ (flat YoY) to INR 4,635/tonne, primarily due to lower power and fuel expenses. Blended fuel cost fell to INR 1.41/kcal from INR 1.45/kcal in Q3FY25, marking the lowest level in the past 17 quarters despite the recent uptick in petcoke prices. Thus, EBITDA/tonne increased ~39% YoY but fell ~10% QoQ to INR 767, broadly in line with our estimate of INR 763.

Capacity expansion on track: NUVOCO’s growth in East India, through process improvements and debottlenecking initiatives, is expected to come on stream in phases by end-Q4FY27. Further, VCL’s assets are expected to be commissioned in a phased manner between Q3FY27 and Q1FY28. Following these expansions, NUVOCO’s cement capacity is expected to reach ~35.0mn tonnes and clinker capacity ~17.0mn tonnes. In the medium term, it plans further growth through a brownfield expansion at Chittorgarh (Rajasthan) and a greenfield plant at Gulbarga (Karnataka), strengthening its multi-regional footprint.

Upgrade to Buy with an unchanged TP of INR 438: We expect NUVOCO’s near-term performance to be led by sustained demand recovery into early Q4FY26, absorption of the recent price hike and benefits of operating leverage. Also, phased commissioning of VCL assets and East-focused projects enhance long-term growth visibility, while an improving premium mix and cost efficiencies from railway siding and long-term slag tie-ups should support margins. We raise our EBITDA estimate by ~1% for FY26E-27E but retain it for FY28E. Due to positive outlook, and fall in stock price, we upgrade NUVOCO to Buy from Accumulate with an unchanged TP of INR 438, 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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