AKD Securities Limited – Off the Analyst’s Desk (January 30, 2023)
Karachi, January 30, 2023 (PPI-OT): LUCK 2QFY23 Analyst Briefing Takeaways
Lucky Cement Limited (LUCK) held its analyst briefing today to brief investors on the 1HFY23 result and future outlook. To recall, LUCK announced the 1HFY23 result on Monday, where the company posted unconsolidated PAT of PkR7.13bn (EPS: PkR22.1), up 24%YoY. On a consolidated basis, the company posted PAT of PkR18.3bn (EPS: PkR49.32).
Company’s offtakes witnessed a declines of 17.9%/45.1%YoY for domestic/exports, whereas company’s domestic market share stood at 14.9% during the period vs 15.1% SPLY. However, exports market share of the company rose to 34% vs. 31.6% SPLY as company has proper established facilities at the port to export loose cement.
With regards to the coal mix, company uses 30-40% of imported coal while the remaining is shared between afghan and local coal. Moreover, management commented that company holds coal inventory of around 30 days and present average cost of coal stands at ~PkR50k/ton. Prices of local and Afghan coal has gone erratic in recent times, with averages for the outgoing quarter standing at ~PkR50k/40k/ton for Afghan/Local coal.
With the recent commissioning of line II and solar power project at the Pezu plant, 34MW solar and 10MW of WHR has been added into the company’s power mix. Current installed capacity stands at 274MW with 68%/20%/12% for Thermal/WHR/Solar. However, post Solar project commissioning at Karachi plant (expected COD 2QFY24) company’s power capacity will increase to 299MW with 62/18/20% for Thermal/WHR/Solar, respectively.
Moving forward, management expects the local demand will continue its downward trajectory, with offtakes expected to decline by ~18-19% for the full year. Demand recovery may be expected once interest rates starts tapering off. Furthermore, exports may increase further if coal price falls to US$120/ton (current: ~US$147/ton).
Finance cost on consolidated accounts has increased during the period due to LECPL’s capitalized financial charges. To note, cement business has currently subsidized debt (TERF, LTFF and EFS). Currently, LCI is the only company in group that has KIBOR based debt on its books.
Higher exchange gains and rising EBITDA margins from foreign operations (Iraq and DR Congo) alongside higher LEPCL plant utilization (92% during the quarter vs. 78.5% in 1QFY23) attributed to the increased consolidated profits, which partially offsetting the low profits from LMC and LCI. Furthermore, as per management, LECPL electricity fuel cost stood at PkR15.16/KWh during the period, one of the lowest in the country, reason being the use of local coal (~2/3rd of the mix).