Intermarket Pulse: LUCK: Relative protection against sector headwinds
- We raise our Jun’19 TP for LUCK to PRs677/sh (marginally up 3.0%), offering 17% upside; we maintain Buy stance on the scrip. LUCK’s unique diversification from ICI and international cement operations, along with cost leadership in its core business lends it some protection against local cement sector headwinds.
- Our revised estimates include recent announcement of LUCK’s backward integration in Iraq by setting up a 1.2mntpa clinker production facility at an estimated cost of US$109mn by the end of CY19. As a result, the business’ net margins are expected to rise to c. 28% (from c. 25%). Moreover, we have also incorporated electricity sale to HESCO.
- We had already tapered our price assumptions, as highlighted in earlier report, where we cut cement MRP by 3% or more. We have assumed 12% YoY growth in FY19F exports for LUCK owing to PKR depreciation and new cement expansions in South. Positive triggers could emanate from exports depicting higher growth as this will help maintain pricing discipline in South.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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