LUCK: 1QFY21 unconsolidated EPS clocked in at PkR6.89

·         Lucky Cement Limited (LUCK) announced results for 1QFY21 where unconsolidated PAT clocked in at PkR2.2bn (EPS: PkR6.89) against our expectation of PkR1.8bn (EPS: PkR5.66). Core income was in-line however deviation occurred from higher other income and lower tax rate. On YoY basis, profitability witnessed an increase of 1.3x while on sequential basis, PAT grew by 4.5x.

·         The real story turned out to be the consolidated earnings which increased by 2.4xYoY while the difference between consolidated and unconsolidated earnings stood at PkR6.56/sh against PkR0.97/sh in 1QFY20 pointing towards impressive performance of Kia Lucky Motors and LUCK's overseas operations.

·         Topline witnessed a growth of 49/52% YoY/QoQ aided by 48%YoY increase in company's local volumes against increase in industry's local offtake of 18.9%YoY for 1QFY21. Similarly, exports also remained buoyant with an increase of 49.5%YoY.

·         Gross margins for 1QFY21 clocked in at 28%, increasing by 12/11ppts on YoY/QoQ basis on the back of increase in retail prices and lower coal prices while additional uplift was provided by decline in FED to PkR75/bag from PkR100/bag.

·         Other income for 1QFY21 increased by 1.4xQoQ due to low base however decreased by 35%YoY. Tax rate clocked in at 17% against 6/25% in 1QFY20/4QFY20.

·         Along with the result, company also apprised on the ongoing projects where 660MW coal power plant has been completed 90% however cessation of FME in the wake of COVID-19 outbreak can delay the commencement. Company is following up with authorities for earliest availability of interconnection facility which is essential for achieving COD. While for 1.2mn tons clinker production facility in Iraq, target date to achieve commercial production stands at Dec'20.

·         We have a Buy stance on the stock with our Jun'21 TP standing at PkR761.3/sh providing upside of 15%.