Nuvoco Vistas - Focused On Asset Sweating, Deleveraging: ICICI Securities

ICICI Securities Report

We recently interacted with Nuvoco Vistas Corporation Ltd.'s management for an update on their business strategy and outlook. Following are the key takeaways:

1. To consolidate its position, as India’s fifth largest cement company and reach 25 million tonnes per annum capacity by FY25,

2. capex on any large scale organic expansion (North or West India) post 25 mtpa is contingent on reduction in net debt position to ~Rs 30-35 billion (from ~Rs 53 billion as on Sep-22), demand-supply scenario (better yielding) in North and West regions;

3. improving sales volume through better capacity utilisation and

4. optimising internal levers to be more cost efficient cement producer.

We believe, Nuvoco (~17% capacity market share in East India) is well placed to capture higher volumes as demand in East India is expected to outpace industry demand for next couple of years.

Robust demand shall pave way for better pricing in operating markets and consequently higher unit profitability. Also, priority to reduce leverage versus committing large-scale capital expenditure (in inflationary environment) will strengthen Nuvoco’s balance sheet.

Taking cognizance of the above, we slightly increase our FY23 and FY24 Ebitda estimates by ~1% each and introduce FY25E numbers.

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