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Lucky Cement (LUCK): 4QCY19 EPS Rs6.4, down 24% YoY, DPS Rs6.5 (below expectations)

• Lucky Cement Limited reported earnings of Rs2.3bn (EPS: Rs6.4); down by 24% YoY on a consolidated basis, slightly below our estimates (Core estimates were in-line).  Along with the financial results, the company also announced the cash dividend of Rs6.5/share.
• Cumulative earnings of the company for the year of FY19 declined by 24% to settle at Rs 12.3bn (EPS: Rs35.0) as compared to Rs 16.1bn (EPS: 45.8) in the corresponding period. 
• During the quarter, net sales of the company witnessed a mere accretion of 4% YoY, despite 17% YoY growth in ICI revenue (59% contribution) in the same period.  The primary reason for slower growth can be attributable to a 12% YoY decline in local cement operations and drag from international cement operations.
• Core cement segment sales was down by 12% YoY, mainly on the back of a significant decline in volumetric sales by 21% YoY owing to market share attrition in both regions amid expansion by competitors.
• Consolidated gross profit margins declined by 2ppts YoY to 21% vis a vis 23% in the same period last year. Core cement margins declined by 7ppts YoY primarily due to a price war in the northern region along with rising costs pressures. However, margins from ICI segment improved by ~2ppts YoY, which supported the overall margins of the company.
• Effective tax rate of the company clocked in at 19% as compared to 27% compared to the corresponding period.
• We flag 1) price weakening, 2) lower than anticipated local demand, 3) unanticipated increase in gas and coal prices, and 4) delay in its upcoming ventures as a key risk for the company.