Lucky Cement Limited : Much awaited roll-out by Kia; what comes along?
- The much-anticipated formal roll-out of products by Kia Lucky Motors Pakistan Limited (KLM), has finally started with the launch of two variants along with another two on display for test marketing. Kia is the first of the three major new entrants in Pakistan to start the roll-out.
- The new offering (Grand Carnival) will essentially cater a niche, new found market segment, where the company does not face any competition. While the entry in truck market via K2700 also offers a good opportunity in the largely under penetrated segment. The products on display (Sportage, Rio), are set to offer consumer more choices in 2,000cc and 1,400cc segments, likely to be launched in 1HFY19.
- We view the launch as KIA’s way to make in-roads in the Pakistan market, where the USD150-175mn assembly plant is expected to come online by Jun’19.
- Going forward, post commencement of its assembly plant, we expect the company to expand its product base targeting 1.0-1.4L segment (Picanto 1.0L, Rio 1.3L potential entries). From the auto space perspective, PSMC being sole competitor in 1.0L (33% share in sales) and close competitor in 1.3L (4% share in sales) with hatchback, appears to be most impacted.
- Being the majority stakeholder in the project (70%), we eye Lucky Cement as the key beneficiary of the development where the trading operation is expected to generate PKR0.17-0.26/sh incremental earnings for LUCK during FY19E. Trading at a forward P/E of 11.4x, we reiterate our Buy call on LUCK with DCF-based SoTP of PKR768.
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.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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