Lucky Cement Limited (LUCK) result preview FY13

In today's Karachi Stock Exchange Analysis, we present the result preview of Lucky Cement Limited (LUCK)  for  the  period  of  FY13  coupled  with  our  outlook  and  recommendation on the scrip.

Lucky Cement Limited (LUCK) to post EPS Rs30.28 and DPS of Rs7 in FY13:

We expect Lucky Cement Limited (LUCK) to post profit after tax (PAT) of Rs9.8bn, translating into an EPS of Rs30.28 during FY13, showing a massive jump of 44%YoY compared to PAT  of  Rs6.8bn  (EPS  Rs20.97)  during  the  same  period  last  year.  Company's cement  dispatches  are  estimated  to  swell  up  to  6.0mn  tons  (up  1.5%YoY), while  local  dispatches  are  expected  to  settle  at  3.7mn  tons  (up  0.70%YoY). Exports on the other hand are expected to show an increase of 3%YoY to 2.3mn tons.  The top line of the company is expected  to  post  a  hefty jump  of 16%YoY  to  Rs38.8bn  mainly  on  the  back  of  11%YoY  surge  in  retention  prices. Coupled with this, 20%YoY decline in coal prices is expected to further boost the company's gross margin by a solid 642bpsYoY to 45% in FY13. We expect the company to announce dividend of Rs7/share with these results. On a quarterly basis, Lucky Cement Limited (LUCK) is expected to post a minimal growth of 4%QoQ in profit  after  tax  to  Rs2.8bn  (EPS  Rs8.69)  for  4QFY13  as  compared  to  Rs2.7bn (EPS 8.32). Led by a 2%QoQ increase in domestic cement prices, net sales of the company are expected to grow by 8%QoQ to Rs11.0bn. With ~5.4%QoQ decline in coal prices, gross margins of the company are expected to have improved by 113bps QoQ to 46%. Company's finance cost is expected to be around the same as last quarter.

Recommendation 'Hold' with Jun-14 TP of Rs289/share:

The  company is  continuing  upgrading  its  plant  efficiency as  it  is  replacing  its existing  cement  grinding  mills  and  packing  plant  with  European  latest  technology to enhance its efficiency and reduce the cost of production. With better  cement  prices  and  low  coal  price  scenario  the  company  is  expected  to maintain its margins going forward. Moreover its diversification towards chemical business is also another positive factor which is likely to help the company boost its profitability. Currently, the scrip is trading at forward PE multiple of 8.3x with dividend yield of 3.1% at FY14 earning basis. We recommend 'Hold' for Lucky Cement Limited (LUCK), as currently the share is offering a potential upside of ~13% against our per share target price for Jun-14 of Rs289.