Lucky Cement (LUCK): 4QFY18 EPS Rs8.9, -31% YoY (-28% QoQ); DPS Rs 8/share (Below expectations)
- LUCK reported 4QFY18 consolidated earnings of Rs2.9bn (EPS Rs8.9), down 31% YoY, which fell short of expectations mainly on the back of lower than anticipated gross margins.
- Net sales were up 16% YoY during the outgoing quarter, supported by 17% YoY sales growth in ICI Pakistan (ICI), subsidiary of LUCK and 27% YoY increase in cement sales.
- Higher cement revenues were mainly due to increase in dispatches (+22% YoY), supported by higher exports (+164% YoY). Extension of 1.25mn tons per annum of cement line to its South plant in Dec 2017 allowed LUCK to tap into new exports market which led to increased exports, we believe.
- Consolidated gross margins contracted by 7ppts to 23% during the outgoing quarter, mainly on the back of decline in margins of cement operations, down by considerable 22ppts YoY to 33%. This was due to higher input costs (coal prices were up 30% to US$100/ton in 4QFY18) and weak pricing power.
- During FY18, sales from the company’s cement operations grew by 4% while profitability declined by 11%, primarily owing to decline in margins.
- The company along with the result has notified that its 660MW coal based power plant achieved financial close on 25 Jun, 2018 with the necessary guarantee from the Government of Pakistan under the implementation agreement. The company expects the plant to start commercial operations from Mar 2021.
- We flag 1) price weakening, 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 North capacity 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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