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LUCK_9MFY23 Analyst Briefing Takeaways. (AKD Off the Analyst's Desk May 02, 2023)

Lucky Cement Limited (LUCK) held its analyst briefing today to brief investors on the 9MFY23 result and future outlook. To recall, LUCK posted unconsolidated PAT of PkR11.1bn (EPS: PkR35.5) in 9MFY23, down 2%YoY. On a consolidated basis, the company posted PAT of PkR36.9bn (EPS: PkR117.9) in 9MFY23, increase of 78%YoY.

 

• Earnings during 9MFY23 shrunk by a mere 2%YoY where the increase in revenue and margins was outweighed by increase in the financial charges and a decline of 31%YoY in other income. Other income for the period amounted to PkR4.4bn, comprising PkR1.3bn from LCI, PkR0.7bn from LMC, PkR0.4bn from Lucky Holdings & Yunus Energy, and PkR2.0bn from income on deposits.
• Sales volumes for 9MFY23 clocked in at 3.7/1.8mn tons for North/South region compared to 3.7/1.5mn tons SPLY. Exports volume for 9MFY23 was reported at 1.6mn tons vs. 0.9mn tons SPLY.
• As per management, company has shifted the majority of its coal mix from Afghan coal to local coal in the North region. On the flipside, in the South, company still uses some percentage of previously procured imported coal in the coal mix while remaining is fulfilled by local counter parts. Overall, weighted average coal cost stood between the range of PkR38-45k/ton during the period.
• Current power mix stands at 68%/20%/12% of thermal/WHR/solar, with installed capacities of 185MW/55MW/34MW, respectively. Furthermore, after the commencement of 25MW solar project at Karachi plant (expected COD 2QFY24), power mix is expected to shift to 62%/18%/20% of thermal/WHR/solar.
• Moving forward, management expects the domestic demand will continue its downward trajectory, with offtakes expected to decline by ~15-17% for the full year.
• LEPCL (Lucky Electric Power Company Limited) currently has the lowest electricity cost at PkR13.24/kWh, due to significant local coal use in the mix. In addition, management informed that company has to shift its coal mix towards imported coal for the coming 6-8 months due to unavailability of Thar coal (owing to operational challenges and other commitments of SECMC). To note, previously 2/3rd of the total coal requirement was met through Thar coal. Furthermore, company's monthly coal requirement stands at 300k tons.
• Management stated that LEPCL has ~PkR22.5bn of outstanding receivables from government. Additionally, increase in the loan on consolidated books is due to the revaluation of foreign loans of LEPCL.

During the nine-month period, company shifted its fuel from FO to gas for Kiln operations of foreign cement operations (Iraq & DR Congo), which impacted positively on their profitability.