This Cement Stock Has A “BUY” Call From HDFC Securities With A Target Price of Rs 827

 

Q2FY22 results of Nuvoco Vistas Corp. Ltd

According to HDFC Securities, the company's "Volume increased 4% YoY, owing to a lower base (NuVista consolidation for 79 days in Q2FY21). NSR fell 3% QoQ, mainly led by a ~5% drop in east pricing, while north pricing remained stable. Opex rose 7% YoY on account of higher energy costs (~INR 90/MT) and annual maintenance expense across most of its factories (impact of ~INR 180/MT QoQ). It was able to offset diesel price impact through logistics efficiency. Thus, unitary EBITDA fell 29% QoQ to INR 853/MT; it fell 12% YoY due to higher fixed costs."

The brokerage has also claimed that the company's "Consolidated EBITDA rose 74% YoY, on a low base from the previous year. However, OCF fell 86% YoY to INR 644mn due to a sharp increase in debtors and inventory. Nuvoco spent INR 2.3bn on ongoing Capex. It also used the IPO proceeds to reduce its gross/net debt by INR 8.8/10bn (vs Mar-21) to INR 69/59bn respectively."

Nuvoco Vistas Corp. Ltd's "Net debt to EBITDA ratio cooled off to 3.2x, from 4.7x in Mar-21 and Nuvoco is aiming to lower it to 2.2x by Mar-22E. It expects to kickstart Capex on its 5mn MT plant in Gulburga in H2FY23E (to be completed by end-FY25). It expects margin to rebound in H2 due to cost pass-through, increased demand, and ongoing margin initiatives" said the brokerage.

Buy Nuvoco Vistas with a target price of Rs 827

The brokerage has said "We maintain our BUY rating on Nuvoco Vistas (Nuvoco) with an unchanged target price of INR 827/share (11x its consolidated Sep-23E EBITDA). We continue to like it for its leadership presence in the east, its various margin initiatives, and continued deleveraging of its balance sheet. Weak demand in the east and high opex hit its profitability in Q2. The impact, however, was moderated by rising contribution of synergy benefits and ongoing cost reductions."

HDFC Securities has said in its research report that "While consolidated revenue grew 13% YoY to INR 20.20bn, EBITDA fell 9% YoY to INR 3.31bn. Higher capital charges led to a net loss of INR 0.26bn (vs a net loss of INR 0.16bn YoY). Nuvoco reduced its net debt/EBITDA to 3.1x in Sep-21 (vs 4.7x in Mar-21) and aims to lower it further to 2.2x by Mar-22E."

Disclaimer

This stock is picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.