Outlook and stock returns
On NSE, the current market price is Rs 339.50 each. Today gained 2.04%. The stock is currently trading at Rs 79.25 above the 52-week low and Rs 238.4 below the stock’s 52-week high. Its 52-week low is Rs 260.25 each recorded on June 16, 2022, and the 52-week high is Rs 577.90 each recorded on September 6, 2021.
Over the week, the company’s shares gained 0.09%. However, over the past month, stocks have jumped 18.94%, and over the past 3 months, stocks have returned positive 11.51%. The company’s shares went public on August 25, 2021, almost a year ago. Over the years, the company’s shares have fallen 36.15%.
Nuvoco reported EBITDA broadly in line (vs. ours/consensus estimate). While volumes fell QoQ (seasonal decline), usage moderated to 79% from 92% QoQ (and 76% YoY). Commercial sales were 72% vs. 75% QoQ. The company reported a healthy price recovery of 7/6% QoQ/YoY. Its input costs were up slightly quarter-on-quarter, as lower raw material costs quarter-on-quarter mitigated the impact of the 20% rise in fuel costs. Freight costs increased by 10% QoQ, mainly due to the increase in the cost of transporting clinker (by trucks vs. rakes). The loss of operating level caused unit fixed costs to increase by 20% quarter-on-quarter. Price increase offset cost inflation leading to QoQ flattened unit EBITDA at Rs 789 per MT. Interest cost fell by 11% QoQ to Rs 1.2 billion due to debt repayment at the end of March 22. However, Net Debt/EBITDA stretched to 4x (vs. 3.5x QoQ) due to lower EBITDA YoY and ~5% increase in debt due to fund rolling.
Capex and outlook
Nuvoco expects fuel costs to begin moderating from the third quarter (after peaking in the second quarter). It maintained its Capex estimate of around Rs 5-6 billion on capacity building for FY23. It is still evaluating the Gulbarga plant and the Capex opportunity in the north. Over the next few months, he plans to take a firm stance on which project to work on from FY24E.
QoQ Sustained Margin, Buy for a target price of Rs 591
Commenting on the stock, HDFC Securities said: “We maintain BUY on Nuvoco Vistas, with an unchanged target price of Rs 591/share (11x its March 24th consolidated EBITDA). We continue to like it for its leadership presence in the east, heavy focus on retail and various margin initiatives In the first quarter of FY22, Nuvoco reported EBITDA broadly in line (vs. ours/consensus estimate) Its unit EBITDA remained Stable QoQ at INR 789 per ton on healthy price recovery, despite QoQ fuel price hike of around 20%.
About – Nuvoco Vistas Corporation Limited
Nuvoco Vistas Corporation Limited (Nuvoco) is a building materials company and part of India’s leading business conglomerate – Nirma Group.
Nirma Group made a foray into the cement sector in 2014 with a new cement plant in Nimbol (2.2 MMTPA). Subsequently, the business grew, thanks to the acquisitions of Lafarge India Limited in 2016 (11 MMTPA) and NU Vista Limited, formerly Emami Cement Limited in 2020 (8.3 MMTPA).
Nuvoco has 11 cement plants in the states of Chhattisgarh, West Bengal, Odisha, Bihar and Jharkhand in eastern India and Rajasthan and Haryana in northern India, comprising five units integrated, five grinding units and one mixing unit. Its integrated power plants are equipped with waste heat recovery (WHR) systems with a total capacity of 44.7 MW, solar power plants with a total capacity of 1.5 MW and captive power plants (CPP) with a production capacity of 150 MW.
The company has a dedicated Construction Development and Innovation Center (CDIC) located in Mumbai. This NABL-accredited facility serves as an innovative product incubation center and can perform over 100 mechanical tests, covering a range of materials, including cement, fly ash, ground granulated blast furnace slag (GGBS), concrete , aggregates, bricks, blocks, and construction chemicals. It also offers third-party external testing services providing products and solutions that have passed the highest standards and are valid worldwide.