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Business Overview: NUVOCO, the 5th largest cement group in India in terms of capacity, is set to scale up its cement capacity from 25 MTPA in FY25 to 31 MTPA by Q3FY27, implying a 11% CAGR over FY25–27E, driven by the Vadraj acquisition. It holds a dominant position in the East with 19 MTPA and North with 6 MTPA capacity as of FY25. The company operates 13 cement plants, 58 RMC units, 150 MW of captive power, 44.7 MW of WHRS, and 5.3 MWp of solar capacity.

How is NUVOCO leveraging the Vadraj acquisition and rising state-level capex to enhance its market share and operational efficiency?

NUVOCO is expanding its cement capacity from 25 MTPA in FY25 to 31 MTPA by FY27, driven by the strategic acquisition of Vadraj Cement via NCLT. The Vadraj acquisition, approved by the NCLT in April 2025, was completed at an attractive valuation of ~$60 EV/tonne. It provides NUVOCO with a strong entry into the high-growth West market, particularly Gujarat, where capex has surged 36% to INR 955 Bn. The acquisition also unlocks significant operational synergies with NUVOCO’s Chittorgarh plant, enabling more efficient servicing of adjacent markets.

Regionally, NUVOCO maintains a dominant ~17% share in the East, supported by increasing government capex— up 35% in West Bengal (to INR 393 Bn) and 18% in Jharkhand (to INR 226 Bn). In the North, where it holds ~5% share, state capex has risen 40% to INR 537 Bn, further enhancing growth visibility.

Overall, this expansion reinforces NUVOCO’s strategic footprint in high-growth regions, boosts capacity at a competitive cost, and creates long-term value for investors.

How is NUVOCO leveraging its regional presence to capitalize on the recent cement price hikes across India?

We acknowledge investor concerns around cement pricing; however, the tide is turning. Prices have already begun to firm up, and we believe the uptrend is gaining traction, driven by a sharp recovery in demand, underpinned by the government’s aggressive infrastructure push.

Our channel checks indicate a broad-based price recovery in April, with All-India prices rising ~INR15/bag. Notably:

East region (where NUVOCO holds 17% capacity) saw a healthy hike of INR10–12/bag. North region (NUVOCO's 5% capacity) witnessed INR8–10/bag gains. West region prices improved by INR5–6/bag, aligning with NUVOCO’s strategic entry via the Vadraj acquisition.

Outlook: We arrive at a 1-year forward target price (TP) of INR 441/share for NUVOCO. We now value the company using our EV/Capital Employed (EV/CE) framework, assigning a multiple of 1.36x for both FY27E and FY28E. This valuation remains conservative, considering the expected near-tripling of ROCE from 3.9% in FY25 to 10.6% in FY28E, based on reasonable operational assumptions.

Risks:

Regulatory: Potential hike in state levies on limestone may impact cost structure.

Cost Inflation: Global petcoke price spikes could pressure margins.

Acquisition Risk: Delays or hurdles in Vadraj acquisition may affect expansion plans.

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