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Nuvoco Vistas got here out with its IPO about two months in the past. Worth Analysis’s evaluation of the IPO may be discovered right here. This follow-up article focuses on the IPO’s efficiency, post-IPO occasions, and adjustments in its valuation since then.
Our evaluation of the IPO
We gave a rating of 13 out of 27 to this cement producer when it got here out with its IPO. Nuvoco is the quickest rising cement firm within the nation, by way of capability, from 2014 to June 2021. The corporate manufactures over 50 totally different merchandise in its three verticals: cement, ready-mix concrete, and trendy constructing supplies and carries a debt of Rs 6,886 crore.
Most of its built-in items have captive energy crops (CPP) and waste warmth restoration (WHR) methods. Put up commissioning of two CPPs, round 70 per cent of the corporate’s energy requirement might be met by these in-house energy methods. Nuvoco follows a multi-price level technique with its three cement manufacturers specializing in premiumisation, rising its commerce operations, and higher geo combine optimisation.
The corporate needs to be an aggressive development participant within the ready-mix concrete enterprise and targets about 100 crops (had 49 crops as of March 2021) within the subsequent three to 5 years.
Our ranking of the corporate was primarily based on the next:
- Out of the 11 enterprise metrics, the corporate did effectively on 4.
- It scored 4 out of six on management-quality-related metrics.
- It scored 4 out of eight within the monetary metrics.
- Out of the 2 valuation-related metrics, it cleared one.
Inventory efficiency since itemizing
The corporate noticed a tepid response to its IPO, which was oversubscribed by 1.71 instances. The certified institutional patrons’ (QIB) portion was oversubscribed by 4.23 instances, whereas the non-institutional buyers’ portion was undersubscribed by 0.66 instances and the retail portion by 0.73 instances.
Nuvoco Vistas made a disappointing debut on the inventory exchanges, with the shares itemizing at a reduction of 17 per cent to its concern worth, opening at Rs 471 and ending the day at Rs 531. Put up itemizing, the inventory reached a excessive of Rs 578 in early September. As of October 18, 2021, the inventory closed at Rs 529, representing a reduction of seven per cent to its concern worth of Rs 570.
Enterprise efficiency
The corporate reported a 44 per cent YoY improve in quantity at 4.2 MT for Q1 FY22. When adjusted for its acquisition of Emami Cement Restricted (now renamed ‘NU Vista Restricted’) in FY21, Nuvoco noticed a rise of 59 per cent in its income to Rs 2,203 crore.
It primarily focuses on the commerce section (76 per cent of gross sales) and targets a better share of 85 per cent within the subsequent 12-18 months. The producer immediately sells cement to the sellers and retailers within the commerce section, who then promote the identical to the tip shopper. Within the non-trade section, the producer sells to the patron immediately, for instance, to a development firm. The commerce section is the extra most well-liked section because it fetches larger realisations.
EBITDA per ton has seen a rise of 58 per cent YoY to Rs 1,238, and the revenue after tax in Q1 FY22 stood at Rs 114 crore as towards a lack of Rs 91 crore within the earlier yr. The EBITDA margin has elevated by seven share factors to 24 per cent. The administration attributes the rise in EBITDA margin to the rise within the volumes, the synergy advantages between Nuvoco and NU Vista, the financial savings coming from the CPPs and WHRs.
Aside from commissioning the 2 CPPs, the corporate has undertaken clinker debottlenecking in three of its 4 kilns. It has additionally commissioned 1.5 million tonnes (MT) grinding unit enlargement. The corporate spent Rs 113 crore in capital expenditure in Q1 FY22 and expects to spend round Rs 1,000 crore (i.e., about 13 per cent of FY21 income) in capital expenditure throughout FY22 and FY23. The first goal of this expenditure is to extend the capability by debottlenecking the crops and thru brownfield enlargement.
Out of the Rs 1,500 crore raised within the IPO, it plans to utilise Rs 1,350 crore for debt reimbursement and has already spent Rs 215 crore for a similar. It intends to keep up a internet debt-to-EBITDA ratio of 1.30-1.35 instances until the tip of FY23.
What to do now?
The corporate plans to extend its capability utilisation to 90 per cent in H2 FY22 from the 76 per cent noticed in Q1 FY22. It expects it to additional attain 95 per cent on the finish of FY23 on account of its debottlenecking of clinker and commissioning of the grinding items. Furthermore, CRISIL Rankings has not too long ago revised upwards the ranking outlook on the corporate’s long-term financial institution services and debt devices to ‘Secure’ from ‘Damaging’.
Since its itemizing in August, the corporate has traded at a P/E between 85-93 instances. It at present trades at a P/E of about 87 instances in comparison with its peer group’s median P/E of about 30 instances. Thus, it appears to be pretty overvalued in comparison with its friends at its present valuation.
Disclaimer: This evaluation isn’t meant to function a suggestion. Do your analysis earlier than investing within the firm. If you’re involved in our inventory suggestions, please go to www.valueresearchstocks.com
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