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Karachi, July 17, 2012 (PPI-OT): With result season in full swing, today AKD Securities gives preview for lucky Cement’s (LUCK) full year FY12 results.
According to AKD Securities expects LUCK to post earnings of PKR 6.6 billion (EPS- PKR 20.5) compared to earnings of PKR 3.97 billion (EPS- PKR 12.28) in full year FY11 – an astounding growth of 67.1%YoY. The growth will emanate mainly on the back of improving situation at the local front, with local prices up 21.8%YoY to wt. Avg PKR 354 per bag in FY12 compared to realized PKR 291 in FY11. While average export prices at ~US$64 per ton are up 11% YoY, export volumes have suffered where AKD Securities forecasts FY12 volumes to clock in at ~2.2 million tons, down 7.2%YoY. Consequently, gross margin (GM) in FY12 are forecast to stand at 38.6% compared to GM of 33.5% in FY11. In 4QFY12 alone, AKD Securities expects the company to post earnings of PKR 1.9 billion (EPS- PKR 6.03),up sequentially by 16.8%QoQ where the growth will primarily emanate from better local pricing as well as devaluation of PKR against the greenback. GM in 4QFY12 is expected at 40.6% compared to 37.9% in 3QFY12. Along with the result, AKD Securities expects LUCK to announce a dividend of PKR 4.0 per share. At current levels, AKD Securities has ‘Accumulate’ stance of LUCK with a target price of PKR 136.8 per share.
Local front leading the growth! For full year FY12, AKD Securities expects LUCK to post earnings of PKR 6.6 billion (EPS- PKR 20.5) compared to earnings of PKR 3.97 billion (EPS- PKR 12.28) in FY11 – an astounding growth of 67.1%YoY. Contrary to the situation 2-3 years back, the growth this time around will be led by the improving situation at the local front, with both prices and volumes giving a huge hurrah. Weighted average ex-factory prices in full year FY12 stood at around PKR 354 per bag compared to PKR 291 a year ago. Moreover, local volumes for LUCK have also increased by around 6.6%YoY to ~37 million tons. While coal prices at US$87.5 per ton have also provided relief, the likely full benefit of the lower prices will be witnessed in 1HFY13.
Profit and Loss Account
| (PKR million) | FY12E | FY11A | %change | 4QFY12E | 3QFY12 | %change |
| Net sales |
32,900 |
26,018 |
26.5% |
8,929 |
8,572 |
4.2% |
| COGS |
20,206 |
17,306 |
16.8% |
5,301 |
5,323 |
-0.4% |
| GP |
12,693 |
8,711 |
45.7% |
3,628 |
3,248 |
11.7% |
| Distribution costs |
3,211 |
3,236 |
-0.8% |
738 |
735 |
0.5% |
| Admin |
489 |
313 |
56.1% |
125 |
124 |
1.0% |
| Finance cost |
419 |
518 |
-19.1% |
125 |
125 |
0.4% |
| Other charges |
413 |
325 |
26.8% |
115 |
113 |
1.8% |
| Other income |
5 |
2 |
105.6% |
2 |
2 |
-14.6% |
| PBT |
8,167 |
4,321 |
89.0% |
2,526 |
2,154 |
17.3% |
| Tax |
1,530 |
350 |
337.0% |
581 |
486 |
19.6% |
| PAT |
6,636 |
3,970 |
67.1% |
1,945 |
1,669 |
16.6% |
| EPS (PKR) |
20.52 |
12.28 |
67.1% |
6.02 |
5.16 |
16.6% |
| Source: Company Reports and AKD Research | ||||||
Investment Perspective: LUCK has underperformed the market by 4.3% in the previous 3 months on the back of contrasting news flow regarding cement prices. Moreover, declining exports have also been somewhat of a concern for the company. That said, AKD Securities remains positive on the company and considerable news flows ahead which will likely lead to price discovery in the scrip. Potential news flow consists of details for the Congo JV, the Iraq JV as well as any development on the potential acquisition of ICI Pakistan Ltd. At current levels, AKD Securities has an ‘Accumulate’ stance on LUCK with a target price of PKR 136.8 per share.