Buy Nuvoco Vistas Corp; target of Rs 441: Choice Equity Broking

Choice Equity Broking is bullish on Nuvoco Vistas Corp has recommended buy rating on the stock with a target price of Rs 441 in its research report dated May 05, 2025.

Broker Research

May 06, 2025 / 09:58 IST

buy

26 Aug, 2025 12:21

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Choice Equity Broking's report on Nuvoco Vistas Corp

We upgrade NUVOCO from HOLD to BUY as 1)We revise our Realisation / EBITDA per ton and EBITDA assumptions higher (Exhibit 2) mostly due to sector tailwinds and also due to company specific reasons like the ongoing cost saving and premiumisation initiatives, 2) We factor in incremental positive value (INR 21bn, ~15% of current market cap) from the Vadraj acquisition, 3) The RoCE expands by 670 bps from 3.9% in FY25 to 10.6% in FY28E on the back of higher operational assumptions as described in 1) above, and 4) We incorporate a robust EV to CE (Enterprise Value to Capital Employed) based valuation frame work (Exhibit 3) which allows us a rational basis to assign right valuation multiples basis improving fundamentals. We forecast NUVOCO’s EBITDA to grow at a CAGR of 20% over FY25- 28E based on our volume growth assumptions of 2%/2%/2%, and realisation growth of 2%/1%/1% coupled with per ton total cost saving of 30%/16%/14% in FY26E/27E/28E, respectively. We like NUVOCO’s premiumization and cost saving initiatives like adding railway sidings, improving AFR rate, optimising freight costs and other de-bottlenecking measures.

Outlook

We arrive at a 1-year forward TP of INR 441/share for NUVOCO. We now value NUVOCO on our EV/CE framework – we assign an EV/CE multiple of 1.36x/1.36x for FY27E/28E, which we believe is conservative given the near tripling of ROCE from 3.9% in FY25 to 10.6% in FY28E under reasonable operational assumptions.

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