LUCK: beyond analyst expectations

Cement dispatches for the domestic sector have ticked up by just over four percent in the ongoing fiscal and Lucky Cement has managed to sell enough of its output to keep pace with the industry and maintain its market share.
The companys top line has registered 5.4 percent increase in 9MFY15 when compared to 9MFY14, even though sales in the outgoing quarter were slightly below the mark when compared to 3QFY14.
But the real tidy act in the recently concluded quarter for the company is visible from the cost of goods sold which was curtailed by a higher proportion than the dip in quarterly sales.
As a result, LUCKs gross margin improved to 46 percent in 3QFY15 as against 44 percent in 3QFY14. Lower fuel prices also helped to curtail distribution expenses to Rs783 million, a reduction of about 23 percent when compared to 3QFY14.
The firms board of directors had plenty other news to share with investors besides the financial performance. A waste heat recovery power plant with capacity to produce 5MW of electricity has become operational since the end of March. Official communiqué also informed that a similar 5MW power plant is now being installed at the PEZU plant and will be operational by October.
Besides updates on its projects in Iraq and Congo, the company also informed that its tariff petition for a 660MW coal-based power plant has also been approved by Nepra in the outgoing quarter.
Coming back to the financial performance, the addition of further captive power will provide further cushion to Luckys cost of production and this may prove to be a key differentiator within the industry when fuel costs shake off their current slumber.

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Lucky Cement

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Rs (mn)                     3QFY15   chg (YoY)   9MFY15   chg (YoY)

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Sales                        11739      -1%       33149          5%

Cost of goods sold            6340      -5%       18473          4%

Gross profit                  5399       4%       14676          7%

Gross margin                   46%                  44%

Distribution cost              783     -23%        2530         -1%

Administrative expenses        243      27%         672         18%

Other operating expenses       349      26%         995         29%

Finance cost                     6     -17%          19        -32%

PAT                           3702      22%        9303         14%

Net margin                     32%                  28%

EPS (Rs)                     11.45      22%       28.77         14%

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