AKD Quotidian about — LUCK: 1QFY13 Result Preview

Karachi, October 24, 2012 (PPI-OT): Lucky Cement Limited (LUCK) is scheduled to announce its 1QFY13 result on Oct 25’12.

According to AKD Securities expects the company to post earnings of PKR 2.03 billion (EPS: PKR 6.27) compared to earnings of PKR 1.50 billion (EPS: PKR 4.66) during the corresponding period last year, a growth of 34.6%YoY. AKD Securities’ earning expectations are premised on flat YoY sales with local despatches at 819k tons and exports at 618k tons with growth likely on account of i) ex-factory average local price of PKR 381 per bag and export price of US$64 per ton, ii) subdued coat prices with average 1QFY13 coal price at US$87 per ton and average freight at US$16 per ton and iii) lower financial charges with finance cost expected at just PKR 75.7 million compared to PKR 119.4 million in 1QFY12. Gross margin (GM) in 1QFY13 is expected to improve to 40.3% compared to 38.9% in 1QFY12 and 39.0% in 4QFY12. AKD Securities’ estimates incorporate an effective tax rate of 14% where difference in this regard could cause earnings to deviate either way from AKD Securities’ estimates. LUCK has been in the news off-late owing to its acquisition (along with other group companies) of ICI Pakistan Ltd. wherein the consortium has recently made an offer to acquire a further 11.2 million shares (12.1%) from the general public at a price of PKR 186.4 per share. Given strong and sustained cash flow generation, with full year FY12 operating cash flow at PKR 9.4 billion, AKD Securities believes the acquisition is likely to be carried out from internal sources. At current levels, LUCK offers an upside of 11% to AKD Securities’ target price of PKR 154.4 – Accumulate!

NML: 1QFY13 Result Preview

Nishat Mills Limited (NML) is scheduled to announce its 1QFY13 result tomorrow where AKD Securities expects NPAT of PKR 1,039 million (EPS: PKR 2.96), flattish compared to NPAT of PKR 1,031 (EPS: PKR 2.93) in 1QFY12 but sequentially up by 3.7%QoQ. AKD Securities expects that NML, one of the largest composite units in Pakistan, will be a direct beneficiary of the boom in cotton yarn demand coupled with PKR depreciation against the US$. For FY13, AKD Securities expects NML’s spinning unit to witness greater utilization levels (FY12: 86% vs. 99% for NCL’s spinning plant), which should compensate lower product prices. In 1QFY13, AKD Securities expects 1.1pptQoQ gross margin expansion on the back of 2.7%QoQ depreciation in PKR /US$ parity and higher volumetric sales, particularly of cotton yarn. Despite expected increase in core profitability, the bottomline is expected to remain flattish due to lower dividend income. AKD Securities retains AKD Securities’ liking for NML where AKD Securities’ Jun’13 TP of PKR 71/share offers an upside of 18% from current levels.

NML: 1QFY13 Result Preview

The Board of Directors of Pak Suzuki Motor Company (PSMC) is scheduled to announce the company’s 9MCY12 financial result tomorrow (Oct 25’12). AKD Securities expects the company to post NPAT of PKR 1,575 million (EPS: PKR 19.14) in 9MCY12 vs. NPAT of PKR 672 million (EPS: PKR 8.17) in the corresponding period last year, a growth of 2.3xYoY. AKD Securities expects gross margins in 9MCY12 to increase by t97bpsYoY to stand at 5.75% on account of increased selling prices and reduced steel costs. In 3QCY12 alone, AKD Securities expects the company to post NPAT of PKR 206 million (EPS: PKR 25) vs. NPAT of PKR 393 million (EPS: PKR 4.77) in 3QCY11 and NPAT of PKR 781 million (EPS: PKR 9.48) in 2QCY12, showing a decline of 48%YoY and 74%QoQ, respectively. In 3QCY12, company sold 17,659 units which are down 43%QoQ where sates were impacted by the imports of used cars and higher product prices. AKD Securities foresees the present trend of sales to continue in the next quarter as well. However, fortunes of auto assemblers are likely to improve going forward on chances of a more restrictive auto import policy and benign outlook for steel and JPY. Currently PSMC is trading at CY13F PER of 5.6x and offers upside of 30% to AKD Securities’ target price of 125/share. Buy!