Earnings Preview: Lower gross margins likely to drag down LUCK’s profitability

January 30, 2019 (MLN): Lucky Cement Limited (LUCK) is scheduled to unveil its 1HFY19 earnings tomorrow i.e. January 31, 2019.

LUCK’s earnings for 1HFY19 ended December 31^st 2018 is expected to fall due to lower gross margins and higher distribution cost.

Based on market expectations derive from below forecasts, LUCK’s after tax profit for 1HFY19 turns out to be locked in between Rs.4.8 billion to Rs.5.3 billion with EPS ranging from Rs.14.9 to Rs.16.5. Meanwhile in 2QFY19 the company is likely to post a profit in between Rs.2.3 billion to Rs.2.8 billion with EPS ranging from Rs.7 to Rs.8.8.

Ms. Misha Zahid at Arif Habib Limited says that the PKR devaluation and lower gross margins due to higher coal prices likely to drag down LUCK’s earnings.

Meanwhile, Ms. Ayesha Fayyaz at BIPL Securities expects that the decline in profitability is primarily accredited to lower gross margins, higher fuel expense and increase in distribution cost as a result of surge in exports.

In line with these expectations, Mr. Ajay Kumar at Ismail Iqbal Securities states that despite an expected increase in company’s topline earnings, the low margins clinker sale likely to pull down company’s profitability.

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