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AKD Securities Limited – AKD Daily (August 05, 2022)

Karachi, August 05, 2022 (PPI-OT): LUCK and EPCL: Result Previews

LUCK – unconsolidated earnings to clock in at PkR39.9/sh in FY22F: LUCK is slated to announce its 4QFY22 result today, where we expect the company to record an unconsolidated nominal profit of PkR1.6bn (EPS: PkR4.9) vs NPAT of PkR2.4mn (EPS: PkR7.4) in 4QFY21. This will take FY22 NPAT to PkR12.9bn (EPS: PkR39.9) against NPAT of PkR14.1bn (EPS: PkR43.5) in FY21. For 4QFY22, the topline is expected to increase by 45/7.6% YoY/QoQ majorly due to higher retail prices which more than offset the impact of the decline in sales volume by 13.8%QoQ, higher fuel and power costs, and hefty PkR depreciation. Likewise, gross margins are likely to clock in at 23.6% vs 22.1% in 3QFY22.

Moreover, the decline in profitability is a result of the super tax applicable for the quarter where ETR for 4QFY22 is likely to clock in at 64% vs 16% in 3QFY22. Consequently, unconsolidated earnings for 4QFY22 are expected to stand at PkR1.6bn, down 71/33% QoQ/YoY. Similarly, for FY22, the topline is expected to increase by 30%YoY due to higher cement prices which should neutralize the impact of the decline in offtake by 9%YoY, and higher coal prices where we witnessed coal prices touching an all-time high of US$460/ton during Mar’22 while avg. at US$212/ton, up 168%YoY in FY22. Gross margins are likely to settle around 23.7% for FY22F vs 30.1% in FY21. Finally, on a consolidated basis, we expect profitability to stand at PkR29bn (EPS: PkR82) for FY22.

EPCL – 2QCY22 earnings to clock in at PkR1.8/sh: We expect EPCL to post Consolidated PAT of PkR1.6bn (EPS PkR1.8) in 2QCY22 as compare to PAT of PkR3.1bn (EPS PkR3.4) in SPLY. The decrease in earnings is primarily attributable to imposition of super tax. Revenue for the June quarter is expected to clock in at PkR21bn vs PkR14.8bn in SPLY, recording an increase of 42%YoY. The increase in revenue is primarily attributable to 13%YoY increase in volumetric sales. On QoQ basis, revenue is estimated to fell by ~9% owing to lower volumetric sales and decline in PVC prices. Gross margins are expected to inch up by ~170bps on QoQ basis, owing to lower EDC prices.

Other operating expenses are expected to clock in at PkR1.18bn, up by 100%/39% YoY/QoQ, owing to higher exchange loss due to devaluation of PKR against USD, which depreciated by ~11% QoQ in 2QCY22. Other income is expected to increase by 41%QoQ, attributable to higher cash and cash equivalent and higher profit rates. Finance cost is estimated to clock in at PkR732mn, up by 43%/19% YoY/QoQ. The increase is primarily attributable to higher financing rates. Effective tax rate for the quarter is expected to clock in at ~71% for 2QCY22, attributable to imposition of super tax. We expect company to announce cash dividend of PkR1.5/sh, taking 1HCY22 dividend to PkR6.5/sh.