Lucky Cement (LUCK): 1QFY19 EPS Rs9.1, -23% YoY (+2% QoQ; (Above expectations)
(PDF attached)
(Oct 29, 2018)
- LUCK reported 1QFY19 consolidated earnings of Rs3bn (EPS Rs9.1), down 23% YoY, which fared better than expectations mainly due to cement operation’s lower effective tax rate.
- Net sales were up 10% YoY during the outgoing quarter, supported by its subsidiary, ICI Pakistan’s revenue growth of 17% YoY during the outgoing quarter.
- While cement volumes grew by 5% YoY thanks to higher exports (+85%), lower retention prices (down by average Rs10/bag) restricted cement revenue growth to 2% in 1QFY19, we estimate. Higher exports were on the back of LUCK’s South cement line extension last year which allowed the company to increase its sea exports, we believe.
- Consolidated gross margins contracted by 4ppts to 22% during the outgoing quarter, mainly on the back of decline in margins of cement operations, down 7ppts YoY to a 6 years low of 30%. Margins continued to fall amid rising input costs and weak pricing power.
- While pretax cement profits fell 22% YoY in 1QFY19, lower effective tax rate, down 4ppts YoY to 14% restricted net earnings decline to 17%.
- Moreover, the company’s 660MW coal fired power plant, which achieved financial close on Jun 25, 2018, will commence its operations in 2021 while its automobile venture is expected to commence commercial production from 2Q2019.
- We flag 1) price weakening, 2) lower than anticipated local demand, 3) unanticipated increase in gas and coal prices, 4) delay in its upcoming ventures as key risk for the company.
Regards,
Nabeel Khursheed
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.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.