By: Yousuf Rahman,
Global Securities Pakistan Ltd.
Lucky Cement Limited (LUCK) announced its results earlier today, posting earnings of PKR 2,669mn (EPS: PKR 8.25) during 1Q FY15, increasing by 5% YoY compared to PKR 2,546mn (EPS: PKR 7.87) registered during 1Q FY14. Increase in earnings primarily resulted from an improvement in volumetric sales and higher cement prices. On a sequential basis, earnings of the company declined by 16% QoQ because of lower primary margins and a decline in volumetric sales. Earnings of the company were below our expectations of PKR 8.62/sh because of lower than expected realized gross margins.
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LUCK’s revenues increased by 12% YoY to PKR 10,470mn during 1Q FY15 because of a 6% YoY increase in total cement dispatches to 1.61mn MT and an 8% YoY increase in local cement prices to PKR 525/bag. Sequentially, revenues declined by 10% QoQ because of 10% QoQ decline in off-take.
Despite higher cement prices, gross margins of the company declined by 3pps YoY to 42% during 1Q FY15 because of a significant increase in both the gas tariff and GIDC. Sequentially, margins declined by 1pps QoQ because of lower volumetric sales and the GIDC hike.
Other income of the company surged by 50% YoY to PKR 332mn because a significantly higher cash balance of ~PKR 9.0bn improved the company’s treasury income during the period.
Our Dec14 TP for the share stands at PKR 385/sh, offering a downside of 6% and a dividend yield of 3%. NEUTRAL!
By: M. Taha Bin Yamin
Shajar Capital Pakistan Private Limited
Lucky Cement Limited (LUCK) posted earnings of PkR2.67bn (EPS: PkR8.25) in 1QFY15, up 5%YoY as compared to PkR2.55bn (EPS: PkR7.87) recorded in 1QFY14.
Improved local cement dispatches (up13%YoY) and increase in retention prices (up 3%YoY) boosted the top-line growth by 12%YoY.
Despite the impressive improvement in topline (up by 12%YoY), gross profitability growth remained in check at 6% owing to rising input costs. Consequently, a slight decline in gross margin of 250bps to 42% was observed.
Non-operating activity witnessed significant changes as other income increased by 50% due to improved liquidity position. However, other expenses saw a rise of 84%YoY negating the positive impact from other income.
On a sequential basis, earnings are down by 16% QoQ due to reduced dispatches.
We revise our stance from ‘BUY’ to ‘HOLD’ with target price of PkR450 offering potential upside of 12%.
|LUCK 1QFY15: Result Review|
|EPS @323mn shares||8.25||7.87||5%||9.77||-16%|
|Source: Company Accounts, Shajar Research|