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LUCK - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Aug 30, 2023)

Lucky Cement Limited (LUCK) held its analyst briefing yesterday to discuss its FY23 results and provide insights into the company's future outlook.

• To recall, company posted earnings of PkR43.8/sh in FY23, compared to PkR48.8/sh in the previous year (down 10%YoY). This decline in earnings is majorly attributable to lower dividends from subsidiaries and higher financial charges.
• Throughout the full year, the company reported local sales of 6.2mn tons, marking a 15%YoY decrease, while the local market share slightly increased to 15.5% from the previous year's 15.3% owed to expansion of 3.15mn TPA. On the other hand, exports experienced a notable decline of 35%YoY, clocking in at 1.2mn tons vs. 1.8mn tons in FY22. In the autos and mobile phone manufacturing segment, volumes plummeted by 55% and 60% YoY, respectively.
• According to the management, current export prices are viable but still lack attractiveness compared to local retention prices. Major destinations for exports include Africa, Sri Lanka, and Afghanistan.
• Looking ahead, all associated sectors (except Power) are expected to align with the overall economy performance, while the Power sector's performance will be contingent on plant availability (management target to maintain 100% availability) and the circular debt position. On local cement demand, management remained cautious, anticipating relatively flat annual offtakes for FY24.
• In terms of coal mix, the South plant primarily relies on international coal, while the North plant utilizes a mix of Afghan and local coal. Moreover, the current power mix comprises 19%/20% of WHR and solar, respectively, while remaining comes from thermal sources.
• Furthermore, management stated that cement pricing is expected to remain stable, given the industry's cost of production is increasing due to lower volumes and higher fixed costs.
• LEPCL’s GoP owed receivables are over PkR25bn as of Jun’23. While, dividend disbursement from LEPCL is contingent on plant’s tariff trueup, project completion, and cash flow considerations. Meanwhile, management believes that future dividend amount can prudently be determined after Dec’23.
• Additionally, LEPCL is currently reliant on international coal, with the availability of Thar coal expected to commence sometime in CY24 following the completion of the third phase of SECMC (Sindh Engro Coal Mining Company).