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JS Securities Limited – JS Research Beep (August 05, 2022)

Karachi, August 05, 2022 (PPI-OT): LUCK: Corporate briefing session key takeaways

Lucky Cement Limited (LUCK) announced its FY22 financial results wherein the company posted an unconsolidated profit of Rs15,300mn (EPS: Rs47.31), +9% YoY. The company didn’t announce any dividend alongside FY22 results. LUCK held its corporate briefing today to discuss the annual results and outlook, we present key takeaways from the session.

Management shared that proactive procurement of coal and operational efficiencies helped improve margins in the 4th quarter. Company used South African coal during the outgoing quarter with an average cost of ~Rs35,000/ton. Company has 45 days of inventory at hand while 15 days of inventory is in transit. Coal is currently being procured at an average cost of ~Rs55,000/ton.

Furnace oil was 40% of the power mix at Pezu plant due to inconsistent gas supply. The company is also considering grid connection at the site.

Effective tax rate for 4QFY22 was 45% while the super tax accrual was around Rs1.7bn.

Capacity utilization has been low off-late but since company has clinker reserves available, it will not affect dispatches in the coming months. LUCK expects a 10-15% decline in domestic cement dispatches for FY23.

Company has recently invested around Rs4bn in a solar plant of 34MW (5MW net contribution) at the Pezu site, the plant will come online by Dec-2022. A similar sized solar plant is considered for the southern site as well.

The company’s cement expansion is on track and the plant is expected to come online by Dec-2022.

Lucky Electric Power Company Ltd (LEPCL) is operational now. LEPCL has received around Rs10-11bn till date and has overdue receivables of ~Rs30bn. Company expects LEPCL to announce dividends from FY24. Thar coal will be available from July-23 onwards at 10,000tons/day, the company is primarily using international coal at the moment.

Country wise export destinations are Sri Lanka (32% share), Bangladesh (37%), Madagascar (16%), South Africa (6%), Others (7%) and Afghanistan (2%).

Retention price for cement in the local market is Rs12,500/ton while retention price in the export market is around Rs10,000-11,000/ton.

Lucky Motors is currently facing some issues on the import of CKD kits but the management expects the problems to resolve within a quarter’s time. The plant is currently operating on a single shift basis.