NUVOCO

Delivers Record EBITDA, Faces Cost Pressures

reported its highest-ever quarterly EBITDA of ₹587.6 crore in Q4FY26, exceeding Bloomberg consensus by 5%, aided by better realizations. However, the West Asia war has triggered input cost inflation across fuel, packaging, and gypsum, raising concerns about margin sustainability in FY27. While management remains focused on profitability over market share, near-term challenges could limit upside. Cost Pressures Fuel costs: blended fuel expected to rise to ₹1.51–1.55/kcal in Q1FY27 (vs. ₹1.44), with further increases likely in Q2. Packaging costs: rose ₹20/tonne in March; another ₹100/tonne impact expected in April. Gypsum costs: higher due to supply disruptions from Oman. Overall cost inflation: ₹200/tonne expected in FY27. Pricing & Strategy Price hikes: ₹8–12/bag in trade segment; ₹10–15/bag in non-trade segment across east and north India. Cost optimization: replacing high-cost pet coke with domestic coal and alternative fuels. Management prioritizes profitability over market share, with willingness to raise prices further if costs escalate. Demand & Competition Cement volumes: 5.98 MT in Q4FY26 (+5% YoY). FY27 volume growth target: 7–9%, in line with industry. Risks: slowdown in government capex, subdued individual homebuilding demand, and intense competition in east India (70% of capacity). Expansion Plans Vadraj Cement asset: clinker and grinding units to be commissioned between Q3FY27–Q1FY28, enhancing western presence. Antique Stock Broking cautions profitability may be lower initially due to start-up costs and lower utilization. Valuation & Outlook Stock down ~13% YTD in 2026. Trades at 7x FY28 EV/EBITDA (Bloomberg estimates). Valuations appear inexpensive, but near-term triggers are limited. Long-term re-rating hinges on successful Vadraj ramp-up and margin stabilization.