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LUCK & KAPCO_4QFY17 earnings previews

​LUCK: 4QFY17 earnings previews

LUCK is scheduled to announce its 4QFY17 results on Jul 31'17 where we expect the company to post net profit of PkR2.97bn (EPS: PkR9.19) during 4QFY17 against PkR3.33bn/PkR3.38bn (EPS: PkR10.30/PkR10.47) in 4QFY16/3QFY17. Earnings are expected to fall 11%YoY/12%QoQ due to: 1) expected dip in topline (-7%YoY/-7%QoQ) likely attributable to lower dispatches (-9%YoY/-8%QoQ) and 2) tighter GM (-7.5%YoY/-1.9%QoQ) due to recent rally in energy prices (average coal price: +60%YoY; average FO price: +51%YoY). On a full year basis, earnings are expected to rise (+3%YoY) at PkR13.39bn (EPS: PkR41.41) in FY17 compared with PkR12.94bn (EPS: PkR40.03) in FY16 on account of 2%YoY growth in topline (owing to 3.6%YoY growth in total dispatches). While, 1.3% dip in GM resulting from higher energy costs, expected to keep the bottomline under pressure during FY17. Alongwith the result LUCK is expected to announce a dividend of PkR12/sh. LUCK is currently trading at a relatively high FY17F/FY18F PE of 18.3x/16.9x owing to earnings growth from its upcoming projects (5 year forward earnings CAGR: +14%), where our Jun'18 TP of PkR1,180/sh offers 36% upside. BUY

KAPCO: 4QFY17 earnings previews

The BoD of KAPCO is scheduled to meet on 22nd August'17 to disclose its FY17 financial results, where we expect the company to publish earnings of PkR2.79bn (EPS:PkR3.16) in 4QFY17, a downtick of 26%YoY but a meager 8% up on quarterly basis. This takes annual profitability to PkR9.55bn (EPS:PkR10.84), lower by 4% YoY. Significant drop in quarterly earnings is likely to be underpinned by 1) high load factor (86.8%) on inefficient plants reflecting excessive demand during summer peak load, 2) suppressed gross margins with cost of inputs rising markedly (FO/RLNG prices up 33.4%/21.3%YoY), and 3) worsening liquidity scenario where Days Receivables Outstanding at 425 days, the highest ever number, in turn burdening the bottom-line with PkR1.3bn of finance cost, notably up by 53%YoY. Keeping these factors in view, we trim our payout ratio forecast to 80% (DPS: PkR8.5) vs. 87% for FY16. Despite the liquidity crunch, upside to our estimates exist in the form of penal income payments by the government received during 4QFY17E. Our DDM based TP of PkR83.8/sh affirms an Accumulate stance on the scrip with 14.8% upside potential.

KD Research