Karachi, August 04, 2022 (PPI-OT): LUCK, MLCF and CHCC FY22 result previews
We present 4QFY22 earnings expectations for Lucky Cement Ltd. (LUCK), Maple Leaf Cement (MLCF) and Cherat Cement Company Limited (CHCC), where we expect bottom-line to take a hit owing to higher financial charges, Super tax and deferred tax adjustments. This would be despite relatively stable margins on gross levels.
We expect LUCK to post unconsolidated EPS of Rs4.55 (-38% YoY) whereas MLCF and CHCC are expected to post EPS of Rs0.54 (-19% YoY) and Rs2.70 (-47% YoY), respectively for 4QFY22. We do not expect any dividend alongside the results.
Higher finance and tax charge to dent earnings
We present 4QFY22 earnings expectations for Lucky Cement Ltd. (LUCK), Maple Leaf Cement (MLCF) and Cherat Cement Company Limited (CHCC). Despite dull dispatches, we expect top-line of cement manufacturers to report a notable increase over better retention prices.
On the cost side, given higher global coal prices, cement players opted to significantly increase the quantum of relatively cheaper Afghan variant in their coal mix. Moreover, the Prime Minister relief package on electricity prices somewhat offset the impact of higher fuel price adjustments. As a result, we expect cement companies’ gross margins of the quarter to remain close to 3QFY22 levels.
Despite relatively stable margins, we expect earnings to take a significant hit from higher finance costs (higher debt and increase in interest rates) and from the 10% super tax charge and deferred tax adjustment this quarter.
Result Previews
Lucky Cement: The board of Lucky Cement is scheduled to meet on 5th August, 2022 to discuss FY22 financial result. For 4QFY22 we expect the company to post a stand-alone EPS of Rs4.55, 38% lower YoY, mainly due to higher tax charge and deferred tax adjustment. We expect earnings before interest and tax of Rs14.63/sh for the last quarter, a 44% YoY increase over proactive coal inventory management and significantly higher retention prices compared to last year.
Despite significant decline expected in 4QFY22, cumulative earnings for FY22 are estimated to decrease 9% YoY to Rs39.5/share. A one-off technical fee from the JV in Africa and dividend income of Rs3.5bn from Lucky Motors, ICI, Lucky Holdings and Yunus Energy have proven to be a cushion for earnings this year. We do not expect any dividend announcement alongside the results.
Maple Leaf Cement Factory Ltd.: We preview 4QFY22 EPS of Maple Leaf Cement wherein we expect the company to post a stand-alone EPS of Rs0.54, -19% YoY. We expect core income to improve compared to last year as we expect gross margins to clock in 1.7ppt YoY higher in 4QFY22 due to a significant jump in retention prices and effective coal inventory management. We expect EBIT of Rs2.03/share (before tax) for the quarter, +69% YoY.
Earnings for FY22 are estimated to clock in at Rs3.81/share, -33% YoY. A hefty dividend of Rs3.5bn from Maple Leaf Power Limited (wholly owned subsidiary) during FY21, which is not expected this year, is another major reason for this magnified decline in unconsolidated earnings for FY22. We do not expect any dividend announcement alongside the results.
Cherat Cement Company Ltd. (CHCC): For 4QFY22 we expect the company to post an EPS of Rs2.70, -47% YoY. We expect gross margins to clock in at 25.4% (-2.3ppt/-1.3ppt YoY/QoQ) as the company was unable to run its gas captive plant due to non-availability of gas and relying on expensive power sources like FO and national grid for power supply. We believe CHCC also had lower retention prices, as compared to its peers in the Northern region.
Having said that, earnings for FY22 are estimated to increase by 23% YoY, (on back of higher retention prices and efficient coal inventory management) to clock in at Rs20.35/share. We do not expect any dividend announcement alongside the results.