Buy Nuvoco Vistas Ltd for Target Rs.560 by Choice Institutional Equities
? Outlook:
We maintain our BUY on NUVOCO with a TP of INR 560, factoring in: 1) Sectoral tailwinds - positive outlook for demand growth and pricing, 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 debt levels 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 assumptions, NUVOCO’s ROCE expands by 1,200bps from 3.9% in FY25 to 15.9% in FY28E. NUVOCO continues to be amongst our high conviction picks in the cement sector.
? We forecast NUVOCO’s EBITDA to expand at a CAGR of 31.4% over FY25 – 28E based on our volume growth assumptions of 6.0%/8.0%/10.0% and realisation growth of 6.0%/1.0%/1.0% in FY26E/27E/28E, respectively.
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