Buy Nuvoco Vistas Corporation Ltd for Target Rs.560 by Choice Institutional Equities
Positive Triggers Complement Attractive Valuation
We maintain our BUY rating on NUVOCO with a target price of INR 560/sh. We continue to be constructive on NUVOCO owing to 1) Higher cement prices (prices hiked in Jan 2026), leveraging strong demand momentum, 2) Company-specific positives, such as a) strong capacity addition of 10 Mtpa by FY27E, b) premiumisation initiatives, c) better geographical optimisation and d) ongoing cost-saving program which targets INR 50/t saving in FY26E. We like NUVOCO’s capital structure with a debt level above 2.0x of EBITDA. There is an optionality to expand footprint in newer markets, such as UP, MP and Maharashtra. Based on our realistic assumption, NUVOCO’s ROCE expands by 1,273 bps, from 3.9% in FY25 to 16.6% in FY28E. NUVOCO continues to be amongst our highconviction ideas in the cement sector.
We forecast NUVOCO’s EBITDA to expand at a CAGR of 31.5% over FY25– 28E based on our volume growth assumption of 6.0%/8.0%/10.0% and realisation growth of 4.0%/3.0%/1.0% in FY26E/27E/28E, respectively.
We arrive at a 1-year forward TP of INR 560/share for NUVOCO. We value NUVOCO on our EV/CE framework – we assign an EV/CE multiple of 1.6x/1.6x for FY27E/28E. We did a sanity check of our EV/CE TP using the implied EV/EBITDA multiple. On our TP of INR 560, FY28E implied EV/EBITDA multiple is 5.7x, which makes NUVOCO amongst the cheapest mid to large-sized cement companies in our coverage.
Risk to the thesis:
Geopolitical volatility risk: Possible geopolitical disruptions could lead to an increase in petcoke price, resulting in higher input cost and margin pressure.
Supply chain risk: Limited rake availability and lack of long-term raw material/fuel tie-ups may impact timely procurement, affecting costcompetitiveness.
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