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Mixed top-line growth: Nuvoco reported mixed Q2FY24 with revenue at Rs 2,573cr, up by 7.2% YoY driven by a mix of volume/realization which grew by 2.3%/4.8% YoY to 4.5Mn ton/ Rs 5,718/ton. Sequentially numbers were muted because of seasonality so revenue saw de-growth of 8.3% to Rs 2,805.5cr, on the back of de-growth in volumes by 10% QoQ but increase in realization by 1.9% QoQ.

Healthy improvement in EBITDA margin: The company’s gross profit increased by 8.4% YoY to Rs 2,103cr while margins improved by 88bps YoY. Also, its EBITDA saw strong improvement of 71.8% YoY to Rs 330cr with margin improvement of 483bps YoY at 12.8%. The growth in gross & EBITDA profits/margins was because of improvement in realizations & better volume YoY, decline in raw materials as well as power & fuel cost. Further, PAT reported profit of Rs 1.6cr as against loss of Rs 130.4cr in the same period last year. Besides, its quarterly performance was muted as well as demand & volumes were impacted due to seasonality and so gross profit/EBITDA was down by 10.6%/ 15.9% QoQ while margins declined by 208bps/117bps QoQ.

Key highlights: 1) Nuvoco capacity to increase to 25MTPA in FY24, post completion of 1.2MTPA expansion at Haryana in Q3FY24. 2) Railway sidings at Sonadih and Odisha operation to commence from Q4FY24. 3) Higher trade share of 74%. 4) Premiumization stood at 37% of cement trade volumes. 5) Value added product mix at 34.4% of total sales volume in Q2FY24. 6) Imported petcoke prices at ~USD 130/ton at the end of Q2 FY24. 7) Demand in North was strong, followed by East but in West demand remained subdued. 8) Net debt reduction remains the top priority. 9) The company has completed its debottlenecking projects at the Risda and Nimbol plants, enhancing the clinker production capacity by 2,000 TPD.

Outlook & Valuations: Nuvoco reported mixed numbers with better YoY performance but muted performance sequentially. Going ahead, management plans and priority is to reduce debt and then add capacity. Meanwhile they would drive growth by focusing on increasing share of premium products, innovating more products, increasing trade share and also optimizing cost. Besides, positive industry tailwinds and better realization will continue to add growth for the cement companies. On the financial front, we have estimated its revenue/EBITDA to grow by 11.4%/22.5% over FY23-25E and maintain a Buy rating and a target price of Rs 455, valuing at EV/EBITDA of 10x on FY25E EBITDA.

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