LUCK - Growth triggers are assembling; clarity awaited
- ​​We revise up Lucky Cement’s Target price to PkR883/sh. Key elements driving the target price higher (from PkR800/sh earlier) include increase in fair value estimates of ICI, upcoming 1.25mn tpa South expansion and 2x size of Iraq grinding capacity. We have not yet incorporated recently announced JV with Kia Motors, where our preliminary estimates can take the TP higher by PkR77/sh to PkR960/sh.
- We expect LUCK to post 2QFY17F consolidated EPS of PkR12.94, up 8%YoY, driven by 6%YoY growth in local dispatches, potential clinker sales to FCCL during the quarter and increase in portfolio income from ICI and Iraq JV. Total cement dispatches are expected to decline 1%YoY due to 29%YoY lower in exports.
- Our Neutral stance on LUCK incorporates all the upcoming ventures except for the JV with Kia Motors and potential DCL Hattar plant acquisition, which if acquired, may replace green field expansion plans in Punjab. LUCK is currently trading at FY17/18F P/E of 14.3x/13.3x.
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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