Karachi, May 03, 2023 (PPI-OT): LUCK - Best of the Lot
Lucky cement holds the position of being the largest cement producer in Pakistan with an annual cement capacity of 15.3mn tons. Company has secured its market share with timely expansions in the present expansion cycle.
Optimal efficiencies in the coal and power mix have continued to shield its gross margins, with 9MFY23 margins settling at 27%. Furthermore, company has shifted a major portion of its coal mix to local coal due to increased Afghan coal prices.
Lucky Cement has a well-diversified portfolio in addition to its core cement operations, namely in power, autos, and chemicals. We also expect LEPCL to start giving dividends from FY24, positively impacting the standalone bottom line.
On the foreign operations front, kiln operations (clinker manufacturing) in Iraq recently switched to natural gas from FO as fuel, subsequently improving the profitability where in the net margins in the 9MFY23 stood at 26% compared to 23% in FY22.
We have a “Buy” rating on the stock, with Dec’23 TP of PkR632.5/sh, offering a potential upside of 47% from the stock’s last close.