LUCK_2QFY20 EPS clocked in at PkR3.03 - significantly lower than expectations, (AKD, Off the Analyst's Desk, Jan 30, 2020)
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LUCK: 2QFY20 EPS clocked in at PkR3.03 — significantly lower than expectations |
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· Lucky Cement Limited (LIUCK) announced results for 1HFY20 where unconsolidated PAT clocked in at PkR1.9bn (EPS: PkR5.99), down 64.8%YoY — significantly lower than our expectations. For 2QFY20, PAT remained at PkR981mn (EPS: PkR3.03), down 67.4%YoY though increasing by a meagre 2.6% on sequential basis.
· Gross margins for 2QFY20 remained at 15%, flat on QoQ basis against our expectation of sequential improvement which potentially points towards high discounts and severe price competition despite some stability during early half of the quarter. However, we await clarity from management in this regard.
· LUCK's sales volumes decreased by 8.4%YoY for 1HFY20 against increase in industry's volume of 6.5% where local sales were a drag (declining by 13.3%YoY vs. increase of 3.5%YoY for industry) as company lost market share in North after commencement of new capacities by competitors.
· Along with the result, company also apprised on the ongoing projects where 660MW coal power plant has been 60% completed and COD target stands at Mar'21. On the other hand, Greenfield expansion at Iraq of 1.2mn tons is expected to come online in 2QFY21.
· We have a Buy stance on the stock with our Dec'20 TP standing at PkR585.6/sh, 23.0% upside. However, in near term, we expect stock to remain under pressure as retail prices of cement remain low amid price competition while the support being provided by slight increase in local demand has been undermined by significant excess capacity. |
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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