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Nuvoco Vistas Ltd. reported consolidated volumes of INR4.0mnt in Q3FY24, down 10.7% sequentially and YoY. The decline was influenced by subdued demand in key markets like West Bengal, Bihar, and Jharkhand in the eastern region, attributed to ongoing elections and fiscal challenges. The consolidated revenue for Q3FY24 amounted to INR24,210mn, down 5.9% QoQ and 7.0% YoY, primarily due to lower volume growth. During the quarter, EBITDA/t reached INR 1,021/t, up 39.2% QoQ and 71.2% YoY. This boost in EBITDA/t was primarily driven by reduced power and fuel costs. PAT for the quarter stood at INR310 mn, a significant improvement from INR15mn in Q2FY24. EPS for the quarter amounted to INR0.9.

? Capex Plan: In FY24E, the company has planned a total Capex of INR6,000mn. As of the first 9 months, INR4,570mn has already been utilized, and the remaining Capex is anticipated to be spent in Q4. Notably, during this quarter, the company successfully commissioned a 1.2mtpa cement mill at the Haryana Cement Plant, thereby increasing the overall cement capacity to 25mtpa. This expanded capacity positions the company to meet the growing demand in the Northern region. The Capex plans for the current fiscal year encompass nimble expansion, Sonadi railway setting, Odisha railway setting, and Biwani expansion. Looking ahead to FY25E, the company has outlined a Capex of INR50,000mn. The decision regarding a greenfield expansion or a brownfield expansion in Chittor or another location will be made once the company reaches a debt level of INR40,000mn by Q4 or the end of April. In addition to its expansion efforts, Nuvoco has launched five RMX plants in 9MFY24, bringing the total number of operating RMX plants across India to 56. The company is strategically focused on enhancing its premium product offerings, with value-added products accounting for 29% of the total sales volume in Q3FY2

? Decline in total cost: The company has initiated a cost-saving initiative called the "Project Bridge Program," focusing on efficiency improvements. In the quarter, power and fuel costs decreased by 16.3% QoQ and 21.0% YoY, driven by factors like an increased linkage mix and reduced fuel prices. Raw material costs also decreased by 16.0% QoQ and 21.0% YoY, mainly due to lower slag and fly ash costs. Despite these savings, freight expenses were impacted by a busy season surcharge in the quarter. Overall, Nuvoco remains wellpositioned, with a focus on cost efficiency and favorable long-term contracts.

? Outlook and Valuation: Cement demand is anticipated to be fueled by: (a) Governmentled infrastructure spending, (b) Increased activity in the housing sector, with approximately 8.4mn units pending completion under the Pradhan Mantri Awas Yojana (PMAY), notably around 3.0mn houses in the East, primarily concentrated in West Bengal. The company's strategic focus areas include premiumization, geo optimization, enhancing trade share, optimizing fuel mix, strengthening the brand, and achieving cost efficiency. The emphasis is on expanding market presence, aligning with the broader objectives of capitalizing on infrastructure development and the housing sector's growth. We expect Revenue/ EBITDA to grow at a CAGR of 1.3%/15.3% respectively over FY23-FY26E. Our target EV/EBITDA multiple is 9.0x on FY26E EBITDA, hence we ascribe a target price of INR370, downgrading our rating to NEUTRAL.

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