The Vadraj acquisition at $60/million tonne is below Nuvoco’s current valuation of ~$76/mt and the timely commissioning of the plant will enhance volume growth visibility (7-8% CAGR) beyond FY27E.

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We maintain a Buy rating on Nuvoco Vistas Corporation Ltd. but keep the target price unchanged at Rs 420/share (nine times its Mar-27E consolidated Ebitda). The company announced the acquisition of Vadraj Cements in Gujarat (6 million metric tonne capacity) for an effective cost of $60/mt versus Nuvoco’s current valuations of $76/mt and below recent M&As at >80/mt.

With a total capex outgo of Rs 30 billion during FY26-27E, Nuvoco expects to commence production from the plant in Q3 FY27E, thus increasing its consolidated capacity to 31 mnmt. This acquisition-

  1. ensures volume growth visibility beyond FY27E,

  2. enhances Nuvoco’s regional sales mix and

  3. puts to rest qualms about it being a sell-off candidate.

The acquired plant has large high-quality limestone reserves, good local availability of low-cost lignite (as fuel), captive jetty (for coastal shipping) with option to set-up railway sidings. As Nuvoco is already selling ~1 mmt (5% of its total volumes) in Gujarat (from its Rajasthan plant), Vadraj ramp-up will free up Nuvoco’s capacity in the north which in turn will be used to gain market share in the that region.

We estimate that capex outgo and net debt will increase in FY26-27E, led by this expansion. However, we estimate cement prices and profitability will rebound FY26E onwards, which should reduce consolidated net debt to Ebitda ratio to 2.1x in Mar’27E versus 3.2x in Sep’24.

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