Lucky Cement (LUCK): 3QFY18 EPS Rs12.4, +2% YoY (-1% QoQ); (In-line with expectations)
- LUCK reported consolidated earnings of Rs4bn (EPS Rs12.4), +2% YoY, supported by 13% growth in revenues and lower effective tax rate.
- Net sales of the company were up owing to 22% YoY growth reported by its subsidiary, ICI Pakistan (ICI). ICI’s ‘Life Sciences’ and ‘Polyester’ businesses witnessed strong growth while ‘Chemicals’ and ‘Agri Sciences’ posted dismal performance.
- Sales from cement operations were up 5% YoY in 3QFY18 thanks to 16% growth in total volume. While local sales grew by 17% YoY, exports witnessed a strong 41% growth due to additional export sales from the new capacity of 1.25mn tons per annum in South that came online in Dec 2017.
- Consolidated gross margins contracted by 6ppts to 26% during the outgoing quarter, mainly on the back of decline in margins of cement operations, down by considerable 11ppts YoY to 34%. This was due to 1) lower local retention (average net retention prices are down 9% YoY to Rs298/bag) and 2) higher input costs.
- LUCK’s consolidated other income grew by 51% YoY in 3QFY18 thanks to 64% growth in income from bank deposits and 32% growth in income from equity investments, we estimate.
- While pretax profits were down 11% YoY in 3QFY18, lower effective tax rate (down 13ppts to 15%) led to growth in net earnings. This was on the back of tax credit on 2) Shariah compliance and 2) Brownfield expansion.
- We flag 1) price competition, 2) higher than anticipated decline in exports, 3) unanticipated increase in gas and coal prices, 4) delay in installation of 660MW coal power plant and 5) delay in commencement of LUCK’s upcoming capacities as key risk for the company.
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).
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