LUCK: Perpetual focus on growth prevails
LUCK: Perpetual focus on growth prevails
Post release of detailed accounts for 9MFY18, we revisit our investment case for LUCK incorporating, 1) recent budgetary measures (*gradual 1% annual reduction in corporate tax to 25% by FY23, *2%/1% super tax impact in FY19/FY20% and * 2% reduction in import duty on coal), and 2) sharp currency depreciation (weakened ~9%/5%TD since Dec'17/Mar'18 to stand at PKR115.5/US$ in May'18). In this regard, higher input cost on account of sharp PkR depreciation offset the benefits of curtailed import duty and corporate tax reduction in our forecasts. Amending for the same, our rolled forward Jun'19 (SOTP based) TP now stands at PKR849/sh, (revised down by 5.5%), implying a BUY stance (29% upside). Consequently our 5yr forward unconsolidated earnings CAGR has also been revised down to 12% (previous 14%). Moreover, FED on cements has been increased again from PkR1.25/bag to PkR1.50/bag, requiring PkR15/bag (GST adjusted) increase in local cement price. Increase in FED is expected to reduce our earnings estimate for LUCK by ~9% for FY19/20F, assuming no price pass-on (not incorporated in our model). To that end, in order to cater to relatively fast pace of demand growth in the northern region, company has initiated a brownfield expansion of 2.6mpta at its Pezu plant. Having said that, the stock has returned 26%CYTD on account of recent cement price recovery (+PkR40/bag in North) with valuations standing at FY18F PE of 16.5x (unconsolidated). While trading at a premium of 78% to the AKD cement universe's FY18F PE, justified in our view, given LUCK's strong earnings prospects and diversification through growth ventures enhancing consolidated fair value.
Lucky Cement is a cement manufacturing and distribution company which is based in Pakistan. Co. is engaged in the manufacture and sale of Ordinary Portland, Sulphate Resistant, and Slag Cement. Co.'s brand names included Lucky Cement, Lucky Star, Lucky Gold, Chairman, and Lucky Sulphate Resistant Cement. Co. maintains production facilities in Pezu (Production capacity: 13,000 tons per day) as well as in Karachi (Production capacity: 8,000 tons per day). In addition, Co. is engaged in developing export markets for bulk loose cement from Pakistan to the Gulf Countries, African Markets, and Far East Region including Nepal & Sri Lanka.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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