LUCK: Higher other income and lower ETR improves net margin
- Lucky Cement Limited (LUCK) announced its result for 3QFY20 wherein the company reported a Profit after Tax of PKR 999mn (EPS: PKR 3.09) compared to PKR 981mn (EPS: PKR 3.03) in the previous quarter. This result was broadly in line with our expectations.
- On cumulative basis, the company reported profit after tax of PKR 2,936mn posting a 65% decline from same period last year. This sharp decline in profitability is mainly attributable to i) drop in local cement dispatches, ii) lower cement prices and ii) higher energy cost.
- The company’s overall volume declined by 2.6% to 5.8mn Tons during 9MFY20 compared to 5.9mn Tons in same period last year. This decline was mainly driven by 7% dip in local sales due to higher competition from commencement of new capacities.
- Other income during the quarter increased by 64% during the quarter. We suspect this increase is mainly attributable to higher dividend income from ICI.
- The company also revealed the information about the potential delay in the commencement of its 660MW core fired power plant. This delay is likely to emerge due to i) delay from construction and supply contractors and ii) possible delay in COD of Lahore Matiari transmission line
- On the international front, Greenfield cement plant expansion in Samawah, Iraq- 1.2mn Tons is on track and the company is expecting the project to complete by the 2QFY21.
- After the relaxation of COVID-19 lockdown in North, dispatches have now reached 80% of its earlier levels. However, the dispatches in the South will continue to suffer from extended lockdown as they are currently at 1/3rd of normal volumes.
- Based on the demand projection in the North, management expects that the prices will recover. Moreover, cement demand also expected to recover in the South once the lock down eases.
- We maintain our BUY stance on the scrip as it is the primary beneficiary of recent increase in cement prices and offers significant upside based on strong fundamental outlook.
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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