Lucky Cement Limited board meeting is scheduled to take place on Feb 20’16 to announce its 1HFY16 results. We expect the company to post NPAT of PkR6.4bn (EPS: PkR19.67) in 1HFY16, up 14%YoY as compared to earnings of PkR5.6bn (EPS: PkR17.32) during the preceding year.

The factors driving the bottom line include i) stable cement prices ii) declining coal prices iii) debt- free balance sheet and iv) rise in other income. In 2QFY16 earnings are likely to stand at PkR3.4bn (EPS: PkR10.49), up 14%YoY.

We expect turnover of the company to remain flat at PkR21.2bn in 1HFY16 (down 1%YoY/+5%QoQ). The sequential increase in topline is mainly driven by higher domestic cement offtakes (up 14%QoQ).

Gross margins (GMs) of the company is likely to augment 370bpsYoY in 1HFY16 to stand at 47% owing to 23%YoY decline in int’l coal prices with larger support came from immense decline in coal shipping charges.

On valuation front, LUCK is offering 20% upside to our Jun’16 Target price of PkR580/sh. Buy!

By: Shajar Capital Pakistan Private Limited