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LUCK FY23 Result Review - Payout surprise, (AKD Off the Analyst's Desk Aug 08, 2023)

Lucky Cement Limited (LUCK) has posted its FY23 results, surprising the market with a cash dividend of PkR18.0/sh. In 4QFY23, the company reported unconsolidated earnings of PkR2.6bn (EPS: PkR8.3), marking a 35%QoQ decline from the previous quarter's PAT of PkR4.0bn (EPS: PkR12.8). The consolidated earnings for 4QFY23 clocked in at PkR37.7/sh, aligning with our expectations.

• Company posted topline of PkR25.5bn in 4QFY23, an increase of 2%/15% QoQ/YoY owing to increase in the cement prices that inflated by 4%QoQ during the quarter. FY23 revenue accumulates to PkR95.8bn vs PkR81.1bn in the previous year due to aforementioned reason.
• Gross margins improved by 186bps to 27.7% in the said quarter vs 25.9% in 3QFY23. This improvement in the gross margins is majorly attributable to ease in the avg. coal prices during the quarter that declined by ~3%QoQ during the quarter. Overall, in FY23 gross margins reported at 27.2% vs 27.8% in the previous year.
• Other income declined by 18%YoY in FY23 to PkR6.1bn vs PkR7.4bn in the previous year. The decline is majorly attributable to low dividend income from the subsidiaries/associates that reduced to PkR2.4bn from PkR3.5bn in FY22 owing to stunted performance from LCI and LMC.
• Finance cost doubled on the quarterly basis in the said quarter to PkR372mn, while in FY23 it increased by 2xYoY to PkR1.2bn vs PkR395mn in FY22. The said increase is majorly on the back of policy rate hikes during the year (Avg KIBOR, FY23:18.1% vs. FY22:10.6%).
• On the bottom line, company posted standalone earnings of PkR8.3/sh in 4QFY23, a decline of 35%YoY, majorly due to retrospective implementation of super tax that brought the effective tax rate of the quarter to 54% vs 29% in the previous quarter. Overall FY23 standalone earnings accumulates to PkR43.8/sh.
• On the consolidated basis, earnings of FY23 accumulates to PkR155.6/sh, an increase of 65%YoY from PkR94.1/sh. This increase is majorly on the back of increase of earnings contribution from LEPCL, improved profitability from foreign cement operations (Iraq and DR Congo) and sale of Nutrico Morinaga by LCI (contribution to earnings ~PkR17/sh).
• Finally, company announced a surprise dividend payout of PkR18/sh, calculating the full year payout ratio to ~41%. To note, company announced dividend after 3 years.