Cement stocks are in focus on the back of improving prices and easing cost pressures. But while the sector still faces seasonal challenges from the monsoon, Nomura believes one company is quietly strengthening its position.
That company is Nuvoco Vistas. Nomura has maintained its ‘Buy’ rating on the stock with a target price of Rs 400, implying an upside of around 17% from its current market price.
According to the brokerage house, the key factors driving the upside potential include stronger pricing, better cost management and a steady capacity expansion plan.
Nomura on Nuvoco Vistas: ‘Buy’ rating stays in place
Nomura has retained its target price of Rs 400 while raising its earnings expectations for the current financial year.
It said, “We increase our FY27F EBITDA estimate by 5% to Rs 2,000 crore.”
The brokerage has kept its estimates for the next two financial years unchanged and continues to expect earnings to remain ahead of broader market expectations.
The brokerage also noted that the stock is currently trading at 8.6 times one-year forward Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortisation (EV/EBITDA).
Key reasons why Nomura is bullish on Nuvoco
Pricing improvement better than expected
One of the biggest positives, according to Nomura, came from cement prices.
While the brokerage’s channel checks had suggested only a modest improvement in pricing, Nuvoco reported stronger realisations during the June quarter.
The report stated, “Nuvoco’s reported cement realizations came in 7% higher q-q.”
Furthermore, Nomura in its report noted that a major part of this improvement came from the non-trade segment, where prices improved much more sharply than anticipated, particularly in eastern India.
Nomura believes this could have wider implications.
It noted, “We see upside risk to earnings for companies, in particular those concentrated in the Eastern region.”
If pricing across the sector remains stronger than expected, earnings estimates for several cement companies could also move higher.
Costs remain under control
The second factor supporting Nomura’s view is cost management.
Although the brokerage expects profitability to soften during the September quarter because of seasonal weakness, it believes input costs remain largely manageable.
Nomura report said, “Management expects costs to remain in check.”
The report explained that while power costs could rise because of planned plant shutdowns, lower packaging expenses are expected to offset part of that increase.
As a result, Nomura expects Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) to decline sequentially during the quarter but remain at healthy levels.
Expansion plans remain on schedule
Nomura also believes Nuvoco’s ongoing capacity expansion remains one of the company’s biggest long-term strengths.
The brokerage report said, “Capex plans intact; progress on the Vadraj expansion remains on track.”
The company has already commissioned a 2 million tonne grinding unit in Surat during July. According to the brokerage report, additional grinding capacity and a new clinker plant are expected to become operational during the first half of FY28.
Nomura believes these projects will help the company achieve its target of 35 million tonnes of cement capacity by FY28.
Nuvoco Vistas: What investors need to watch next
As per the Nomura report, stronger cement prices, disciplined cost management, and timely expansion together provide visibility for future earnings.
While the monsoon season could temporarily affect demand and quarterly profitability, the brokerage expects Nuvoco Vistas to benefit from improving pricing trends today while also positioning itself for higher production capacity over the next few years.
Disclaimer: The views, ratings, and target prices mentioned in this article are derived entirely from a third-party institutional brokerage report by Nomura and do not reflect the editorial stance of this publication. Stock market investments involve high market risk; a ‘Buy’ rating or sequential target projection does not guarantee future financial returns. Readers are strongly urged to consult a SEBI-registered financial advisor before executing any buy, sell, or hold decisions related to Nuvoco Vistas or any other equity instrument. This disclaimer has been generated using AI to support user well-being and responsible content consumption.