Karachi: Lucky Cement Limited (LUCK) has declared the profit after tax (PAT) of PKR 1,513mn in 2QFY12, taking 1HFY12 profitability to PKR 3,018mn (EPS: PKR 9.33), a rise of 107% YoY compared with PAT of PKR 1,461mn (EPS: PKR 4.52) during 1HFY11.
According to Arif Habib Limited, this strong profitability growth was mainly emanated from a strong 25% YoY improvement in average retention prices, which were supported by a modest 2% YoY increase in volumes.
|PKR million||1QFY12||1QFY11||QoQ||1HFY12||1HFY11||YoY||Net Sales||7,878||7,496||5%||15,374||12,028||28%|
|Cost of Sales||4,978||4,581||9%||9,560||8,060||19%|
|Profit after tax||1,513||1,506||0%||3,018||1,461||107%|
|Dispatches (000 tons)||1,430||1,437||-1%||2,867||2,806||2%|
|Sources: Company financials and AHL Research|
Strong pricing scenario has yielded 38% gross margin in 1HFY12
Average retention prices during 1HFY12 have jumped by 25% YoY due to strong pricing scenario in domestic market. This coupled with a modest 2% YoY volumetric growth translated into revenue growth of 28% YoY in 1HFY12. Though the cost of sales have also swelled by a 19% YoY but the has company managed to strengthen its gross margin to 38% in 1HFY12 from 33% a year back.
Distribution cost is down by 4% YoY
Distribution cost of the company went down by 4% YoY to PKR 1.7bn during 1HFY12. This was mainly on account of an 8% YoY volumetric decline in the exports. Since last year LUCK has been focusing on the domestic market, which not only yields better margins but also reduces the distribution cost.
TDF starts trial production in Dec-11
In the notice issued, the management of the company declared the trial production of its Tyre Derived Fuel (TDF) plant. This plant is likely to replace 40% of coal used in southern plant by used tyres. As per Arif Habib Limited’s calculations, TDF plant will likely to result in an annualized savings of PKR 2.6/share.
The stock has still more to offer!
The stock of LUCK has gained by 15% since start of January 2012, outperforming the benchmark KSE 100 Index, by 10%. Arif Habib Limited believes that the stock has still more to offer as it is trading at attractive PER of 4.7, a deep discount of 27% to the average PER of AHL Cement Universe. Besides this it also offers a sizeable upside potential of 38% from Arif Habib Limited’s DCF based target price of PKR 119.1/share thus Arif Habib Limited recommends a Buy.