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LUCK 1QFY24 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Oct 31, 2023)

Lucky Cement Limited (LUCK) held its analyst briefing earlier yesterday to apprise investors on their 1QFY24 results and future outlook. Here are the key highlights:

• To recall, company reported unconsolidated earnings of PkR22.1/sh, a 1.7xQoQ increase, attributed to the absence of the super tax’s retrospective impact, healthier gross margins, and higher other income compared to 4QFY23.
• Management mentioned that the significant improvement in gross margins in the previous quarter was a one-off because the company procured coal inventory at good rates. This trend in the margins is not expected to continue in 2QFY24 as coal prices have started increasing.
• On the consolidated front, earnings increased to PkR56.5/sh (↑50%QoQ), driven by strong earnings from LEPCL and improved profitability from foreign operations (Iraq & DR Congo), showing robust growth due to strong cement demand and higher retention prices.
• Local cement market share improved to 17.5% in 1QFY24 compared to 14.8% in SPLY, attributed to the addition of 3.15mn TPA capacity. Exports also increased due to the decline in coal prices, making exports more feasible.
• Company primarily uses imported coal in the South plant and a mix of local and Afghan coal in the North plant. The coal mix for the previous quarter remained 60%/40% of imported and local coal.
• Current cement prices stand at ~PkR1,150/bag in the north and slightly less than PkR1,100/bag in the south. Going forward, management expects a 5% annual growth in cement sales numbers in FY24.
• The company has invested significantly in renewable power projects (Solar & Wind) of ~103MW, with 62MW of solar projects completed and 6MW solar and 28.8MW wind in progress. The total CAPEX for all projects is ~PkR20bn, with PkR8.0bn already incurred.
• The total cost of the wind power project is PkR10.0bn, and post-commencement of all renewable solar projects, the mix of renewables (Solar, Wind & WHR) in power would be ~40-45%.
• Management anticipates a decrease in profitability for local cement operations and autos due to increased costs and challenges on the demand front. However, the chemical segment, power, and foreign operations are expected to continue producing similar results.
• On the power front, LEPCL is currently at 3-3.5 months of receivables overdue. Management believes the circular debt situation will improve with recent reforms in the energy sector and targets to maintain a 100% availability factor going forward.