Analyst:

Muhammad Sarfraz Abbasi

sarfraz.abbasi@atlascapital.com.pk
(+92-21)-111-226-100 (Ext.403)
Morning Pulse Feb 3, 2011

Cement Sector: LUCK missing luck were seen at US$130.79. The devastating floods in
BUY
Australia have shuttered coal mines throughout
as volumes remain doomed… Queensland. In our view, this interruption may last for
months which seems to a major reason behind huge
Synopsis… upsurge in international coal prices. In addition to this, Market Snapshot
rising demand is pushing up prices drastically as there is Index Chg %
Lucky Cement Limited (LUCK) has recently announced KSE 30 11851.88 -31.5 -0.27
a significant coal shortage in China which is a major
Pakistan Research

its 1HFY11 results. The bottom line of the company KSE 100 12242.39 -30.99 -0.25
posted sharp decline of 23.45% Y-o-Y as company consumer of coal. We believe mounting demand from
KSE ALL 8482.67 -21.67 -0.25
recorded Profit after Tax (PAT) of PRs1.46bn translating china which is world’s second largest economy in terms
into an EPS of PRS4.52 in 1HFY11, against corresponding of GDP will push prices further up.
Key Data
period of last year when the company had recorded
Market Cap(PRs bn) 22.64
PAT of PRs1.91bn and EPS of PRs5.90 respectively. In our Coal per ton prices (US$) Shares Outstanding (m) 323.38
today’s report we present detailed analysis of the 135 Bloomberg LUCK PA
2009 2010
financial performance of the company and future 115 12M Avg. Volume (m) 1.56
outlook. 95

Export dispatches declined sharply… 75

During the period under review, top line of the 55
company witnessed marginal decline of 0.73% to 35
12M LUCK's relative performance
PRs12.03bn against PRs12.12bn in 1HFY10. This drop in 143%

15
top line was mainly because of the lower volumetric 121%

Aug
May

Sept

Oct
April
Feb

June
Mar

July

Dec
Nov
Jan
sales. Even though the company has shown growth in 99%

its local dispatches of 13.16% over the same period of Source: Global coal NEWC Index, Atlas research 77%
last year however this impact was mitigated by massive LUCK KSE-100
55%
decline in export dispatches. Luck posted about 30.01%

Apr-10

Aug-10
Feb-10

Oct-10
Jan-10

Jun-10

Sep-10

Nov-10

Dec-10

Jan-11
Mar-10

May-10

Jul-10
decline in its export sales which led to witness decline of Mild operating costs well supported bottom line…
11.86% to 2.81m tons against 3.18m tons last year in its During the period under review, distribution cost of the
total dispatches. This plunge in export volumetric sales company went up by 5.16% to PRs1.82bn against
was mainly due to sluggish construction activities PRs1.73bn in 1HFY10. However, Per ton distribution cost
abroad. has increased by 19.30% Y-o-Y. In our view this upsurge
in distribution was mainly driven by higher fuel charges
Per ton Cost of Sale recorded much higher… and freights. On the other hand, other expenses went
On the other hand, cost of sales of the company down by 27.50% to PRs119.26m in comparison of the
increased by 6.17% to PRs8.06n against PRs7.60bn in same period last year when company had recorded Atlas Capital Markets (Pvt.) Ltd
1HFY10 even though production was recorded 9.07% other expenses of 164.47m. In addition to this, financial
B-209, Park Towers, Clifton, Karachi
lower than last year. Higher cost was owing to rising charges of the company were recorded lower by 1.25%
Equity Research: Equity Sales:
electricity and gas tariffs as per ton cost rose by 20.46% to PRs294.15m in 1HFY11 against PRs297.89 in 1HFY10. Tel: 92 (21) 5376125 Tel: 92 (21) 5368261-8
Y-o-Y. In addition to this, per ton coal prices in This slight decline in financial charges was mainly Fax: 92 (21) 5376126 Fax: 92 (21) 5376122
international market have shown significant upsurge in because of lower long term debt on balance sheet as Money Market: Corporate Finance:
recent past months as December closing prices of coal its leverage has declined by PRs867.61m since June ‘10. Tel: 92 (21) 5376128 Tel: 92 (21) 5824991
Fax: 92 (21) 5376129 Fax: 92 (21) 5376122
Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time
Financial Products Distribution:
of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Atlas Capital Markets (Pvt.)
Tel: 92 (21) 5376125
Limited accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All
Fax: 92 (21) 5376126
information is provided without warranty and Atlas Capital Markets (Pvt.) Limited makes no representation of warranty of any kind as to the accuracy or
completeness of any information hereto contained. Atlas Research is available on Bloomberg and
Thomson Financial
 ATLAS CAPITAL MARKETS (PVT.) LIMITED UPDATE

(PRs m) 1H/FY10 1H/FY11 Chg

Net Sales 12,116 12,028 -1%
Cost of Sales 7,592 8,060 6%
Gross Profit 4,525 3,968 -12%
Distribution exp 1,727 1,816 5%
Operating Profit 2,640 1,994 -24%
Other Expenses 164 119 -27%
EBIT 2,477 1,875 -24%
Finance Cost 298 294 -1%
Profit Befor Tax 2,179 1,581 -27%
Taxation 271 120 -56%
Pakistan Research

Profit After Tax 1,908 1,461 -23%

EPS (PRs) 5.90 4.52 -23%
Gross Margin 37% 33%
Operating Margin 22% 17%
Net Margin 16% 12%
Source: Company Accounts, At las Research

Future Outlook and recommendation…

We expect cement dispatches to pick up from 3QFY11.
2HFY11 seems to be a recovery phase for the sector as
construction activities have started picking up. We
believe with retention prices are much improved than
last year, however, we believe, further augment in
retention prices would bode well given demand
bounces back timely. However, we do not see any big
miracle happening at export front as no excitement has
shown in construction activities of GCC countries and
other key destinations. We downgrade our Target price
on LUCKY from PRs90 to PRs85, however our BUY stance
is maintained as the scrip is currently trading at a
discount of 21.52% to our revised fair value.