Target: ₹240

CMP: ₹183.75

Weak demand and higher costs hit NCL’s cement division performance, but its Boards division performance was boosted by the low base. The joint venture for the modular container was terminated and the door division continues to report losses.

Weak demand in its operating region led to cement volumes falling 13.6 per cent y/y to 0.6m tons. However, higher realisations (up 7 per cent y/y) restricted the cement revenue decline to 2.7 per cent y/y (to ₹480 crore). But, overall EBITDA fell 52 per cent y/y to ₹32.70 crore and EBITDA/ton (cement) 46.5 per cent y/y to ₹544 on higher costs. The capacity upgrading at Mattampally GU would aid volume growth. We expect cement volume/ revenue to register 6 per cent/9 per cent CAGRs over FY22-24.

The joint venture agreement with Moravia Containers of the Czech Republic was terminated; consequently NCL has withdrawn its investment there. Debt as on March 2022 was ₹310 crore (net D/E about 0.4x). The pending environmental clearance would delay the Vizag GU expansion.

We expect 9 per cent, 7 per cent and 8 per cent revenue, EBITDA and PAT CAGRs over FY22-24 respectively.

We retain our Buy rating, with a lower target price of ₹240

Risks: Rise in input costs, demand slowdown.