LUCK June 2025 target price raised to Rs. 1561
Topline Securities has reiterated its “BUY” recommendation for Lucky Cement (LUCK) with a revised target price of Rs1,561 per share by June 2025. This offers a potential upside of 73%, translating to a total return of 77%. The key factors contributing to this recommendation include:
- Superior Cement Margins and Profitability: Due to efficiency and timely expansion of a new cement plant.
- Autos: Expected growth in auto/mobile sales driven by a reduction in the policy rate and the launch of a new model/variant.
- LCI: Expansion in Soda Ash and positive developments in the pharma sector.
- Coal Power Plant: Improved recoveries in the coal power plant.
- Foreign Operations: Strong performance due to a change in the fuel mix and expansion in Iraq.
- Strong Cash Generation: High annual cash flows from the cement business and dividends from subsidiaries/associates.
Earnings and Growth Projections
Topline Securities estimates consolidated EPS forecasts of Rs260.8 and Rs294.2 for FY25F and FY26F, respectively, with a 3-year earning CAGR of 21%.
Table: Consolidated EPS Forecasts
| Fiscal Year | EPS (Rs) |
|---|---|
| FY25F | 260.8 |
| FY26F | 294.2 |
Superior Margins and Profitability
LUCK’s local cement business is expected to see improved gross margins, rising to 34-36% over FY24-FY26 from 27% in FY23. This improvement is attributed to a decline in coal prices and an enhanced power mix due to the addition of renewable energy sources.
Lucky Motors (LMC)
LUCK’s auto segment is poised for growth with an expected increase in plant utilization to 27% by FY26, driven by the reduction in policy rate and the launch of a new hybrid model.
Soda Ash Expansion and Pharma Sector
The planned expansion of the soda ash plant and positive developments in the pharma sector, such as deregulation and Pfizer acquisition, are expected to boost LCI’s profits significantly.
Foreign Operations
LUCK’s foreign cement operations are projected to generate substantial profits, contributing significantly to the consolidated income due to strong demand, efficient fuel mix, and planned expansion in Iraq.
Financial Performance and Projections
LUCK’s unconsolidated EBITDA, including dividends from subsidiaries, is expected to improve significantly, driven by strong cash flows and strategic expansions.
Table: Financial Performance Projections
| Metric | FY23 | FY24E | FY25F | FY26F |
|---|---|---|---|---|
| EPS (Rs) | 166.4 | 228.2 | 260.8 | 294.2 |
| Earnings Growth | 65% | 37% | 14% | 13% |
| Dividend Yield | 4% | 4% | 4% | 5% |
| ROE | 21% | 23% | 21% | 20% |
| Price-to-Earnings (PE) | 3.0 | 4.0 | 3.5 | 3.1 |
| Price-to-Book Value (PBV) | 0.6 | 0.8 | 0.7 | 0.6 |
Key Risks
Key risks to LUCK’s outlook include lower-than-expected policy rate decline, decline in local cement prices, higher PKR depreciation, reduced demand for autos and mobiles, geopolitical issues, and delays in planned expansions.
Conclusion
LUCK offers a promising investment opportunity with a potential total return of 77% based on the revised target price. The company’s diverse business segments, strong financial performance, and strategic expansions make it a preferred pick for investors.
Disclaimer:
The information in this article is based on research by Topline Securities. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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