Buy Nuvoco Vistas Corporation; target of Rs 560: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Volume growth: Nuvoco Vistas reported a 9.3% YoY increase in volumes, driven by demand from the infrastructure segment, with a strong RMC business and lower freight costs supporting operating performance.
  • Pricing and cost management: The company expects to offset Q3 cost inflation of INR100-120/t through INR20/bag price hikes, already implemented in non-trade in North and East and trade in East, supporting margins.
  • Capacity expansion: Nuvoco is targeting capacity expansion to 35mtpa by FY28, with the Vadraj ramp-up expected to drive incremental volumes and Gujarat volumes reaching an annualized 2mt by Q4FY27.
  • Debt management: Net debt has risen to over INR50bn, but management expects to reduce debt by FY27-end through working capital release and stronger H2 cash flows.

Thesis Validation Checklist

  • Industry demand growth: Expected to grow ~8% in H2FY27, supported by post-monsoon construction and the seasonal Dec-Jun demand cycle.
  • Pricing trends: Average price increases should offset Q3 cost inflation, provided they sustain post-Diwali.
  • Margin recovery: Sustained price hikes, logistics efficiencies, and improving capacity utilization should support margin recovery.
  • Debt reduction: Working capital release and stronger H2 cash generation should bring net debt towards March levels by FY27-end.