Lucky Cement (LUCK) has posted an unconsolidated NPAT of PKR5.5bn (EPS: PKR17.12) for 3QFY22, up 122% qoq but down 23% yoy. The result has come in much higher than our projected EPS of PKR10.25. Major deviation stemmed from higher-than-expected other income, largely due to dividend income received from Lucky Motor Corporation.
On a consolidated basis, LUCK has reported net profits of PKR7.6bn (EPS: PKR23.41), up 8% yoy. The earnings in 3QFY22 have come higher than our expected EPS of PKR19.20. Higher earnings from LMCL, ICI and international cement businesses have majorly led to the deviation.
Key highlights for 3QFY22 result (Unconsolidated):
Despite the decline in total sales volumes by 3%/10% qoq/yoy, net revenues have increased by 25% yoy and 3% qoq to PKR21.3bn, majorly attributed to higher cement prices. Topline came broadly in line with or expectation of PKR21.9bn.
Gross margins declined by a sharp 13.9ppt yoy and by a mere 0.5ppt qoq to c.22.1%, in line with our expectation of 22%. The qoq decline in margins is majorly attributed to lower than adequate increase in cement prices to fully pass on the impact of elevated international coal prices. Moreover, Pezu plant was operational on FO as the gas pipeline had sustained damages. However, the gas pipeline has now been restored.
Other income has clocked in at PKR4.1bn, up 5.5x qoq, but down 5% yoy. Other income came in well above our expectation of PKR1.4bn. This is due a c.PKR1.1bn dividend received from Yunus Energy and Lucky Motor Corporation. We await detailed financials for more clarity on the other gains that LUCK has booked during the quarter.
Among other line items: (i) effective tax rate has clocked in at 16% vs 14% in SPLY, and (ii) Distribution expenses have increased by 12% yoy to PKR1.3bn, due to increase in transportation expense, in our view.
LUCK’s 3Q consolidated earnings have shown decent growth – majorly due to massive growth in invested companies. Going forward, the commission of operations of Lucky Power (LEPCL), coupled with decent growth coming from existing customers will elevate the future earnings of the company. Core cement earnings are also expected to increase due to elevated local cement prices, while new expansion in the North will also help the company to increase sales volumes. Therefore, we maintain our Buy rating on the stock with a TP of PKR898/sh.