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.