{"id":12228,"date":"2025-12-31T17:13:16","date_gmt":"2025-12-31T12:13:16","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=12228"},"modified":"2025-12-31T17:13:18","modified_gmt":"2025-12-31T12:13:18","slug":"lucks-core-improvement-to-uplift-valuation","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/lucks-core-improvement-to-uplift-valuation\/","title":{"rendered":"LUCK&#8217;s Core Improvement to Uplift Valuation"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><strong>A Bullish Upgrade<\/strong><\/h3>\n\n\n\n<p>JS Global is upgrading its stock rating for <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/luck\/\" data-type=\"post_tag\" data-id=\"10\">LUCK<\/a><\/strong> to <strong>Buy<\/strong> from a previous Hold. We are raising our Sum-of-the-Parts (SoTP) based <strong>Target Price<\/strong> (TP) from <strong>Rs480\/sh<\/strong> to <strong>Rs570\/sh<\/strong>, implying a <strong>17% upside<\/strong> from the current market price.<\/p>\n\n\n\n<p>The central thesis for this positive revision is a stronger contribution and an improved outlook for <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/luck\/\" data-type=\"post_tag\" data-id=\"10\">LUCK<\/a><\/strong>&#8216;s core cement operations, which are now poised for enhanced profitability and growth.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The New Valuation at a Glance<\/strong><\/h3>\n\n\n\n<p>The upgraded valuation is underpinned by several key financial metric adjustments and a more favorable market outlook. These core drivers highlight the improved investment case for<strong> LUCK<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Target Price Increase:<\/strong> The target price has been raised to <strong>Rs570\/sh<\/strong> from a previous <strong>Rs480\/sh<\/strong>.<\/li>\n\n\n\n<li><strong>Core Cement Contribution:<\/strong> The valuation of core cement operations has increased to <strong>Rs286\/sh<\/strong>, now accounting for <strong>50%<\/strong> of the SoTP valuation, up from its previous contribution of Rs214\/sh (45%).<\/li>\n\n\n\n<li><strong>Favorable Risk Assumption:<\/strong> The valuation model now incorporates a lower risk-free rate assumption, reduced from 12% to <strong>11%<\/strong>.<\/li>\n\n\n\n<li><strong>Attractive Multiples:<\/strong> The stock is trading at attractive P\/E multiples of <strong>7.8x<\/strong> and <strong>6.7x<\/strong> based on our consolidated EPS forecasts of <strong>Rs62.8 for FY26E<\/strong> and <strong>Rs72.2 for FY27F<\/strong>, respectively.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Drivers of Core Cement Improvement<\/strong><\/h3>\n\n\n\n<p>The enhanced valuation is rooted in specific, positive changes within LUCK&#8217;s standalone cement business, which have led to a more optimistic earnings forecast.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Strengthening Margins<\/strong><\/h4>\n\n\n\n<p>Standalone earnings are driven by stronger margins, which are expected to average approximately <strong>38%<\/strong> (supported by a 39.2% margin in 1QFY26A). This improvement is attributed to four key factors:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Softer international coal prices, which reduce input costs.<\/li>\n\n\n\n<li>Improved export margins resulting from a strategic shift from selling clinker to higher-priced cement exports.<\/li>\n\n\n\n<li>Lower grid tariffs, with the company benefiting from an average rate of Rs32.5kwh.<\/li>\n\n\n\n<li>Improved other income, driven by higher cash balances on the balance sheet.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Robust Domestic Demand<\/strong><\/h4>\n\n\n\n<p>Our domestic cement demand forecasts have been revised upward to <strong>11% for FY26E<\/strong> (from 8%) and <strong>8% for FY27F<\/strong> (from 6%). This outlook is reinforced by management, which expects at least <strong>9-10% demand growth in FY26<\/strong>, driven by improving macroeconomic conditions.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Upward Revision in Earnings Forecasts<\/strong><\/h4>\n\n\n\n<p>As a direct result of these positive operational and market trends, the standalone earnings forecasts for <strong>LUCK<\/strong> have been increased by <strong>8% for FY26E<\/strong> and <strong>6% for FY27F<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>A Diversified and Resilient Portfolio<\/strong><\/h3>\n\n\n\n<p>While the core cement business is the primary upgrade driver, <strong>LUCK<\/strong>&#8216;s diversified holdings provide substantial stability, contributing the remaining <strong>50% (Rs284\/sh)<\/strong> to the valuation. The breakdown of this portfolio is as follows:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">Entity<\/th><th class=\"has-text-align-left\" data-align=\"left\">Contribution (Rs\/sh)<\/th><th class=\"has-text-align-left\" data-align=\"left\">Share of SoTP (%)<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">Foreign cement operations<\/td><td class=\"has-text-align-left\" data-align=\"left\">107<\/td><td class=\"has-text-align-left\" data-align=\"left\">19%<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Lucky Electric Power Company Ltd (LEPCL)<\/td><td class=\"has-text-align-left\" data-align=\"left\">83<\/td><td class=\"has-text-align-left\" data-align=\"left\">15%<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Lucky Motor Corp (LMC)<\/td><td class=\"has-text-align-left\" data-align=\"left\">58<\/td><td class=\"has-text-align-left\" data-align=\"left\">15%<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Lucky Core Industries (LCI)<\/td><td class=\"has-text-align-left\" data-align=\"left\">35<\/td><td class=\"has-text-align-left\" data-align=\"left\">6%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Strategic Outlook and Management Commentary<\/strong><\/h3>\n\n\n\n<p>Recent updates from <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/luck\/\" data-type=\"post_tag\" data-id=\"10\">LUCK<\/a><\/strong>&#8216;s management provide qualitative insight into the company&#8217;s strategic direction and operational discipline.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Strategic Expansion and Capital Discipline<\/strong><\/h4>\n\n\n\n<p>Management noted that a &#8220;long overdue&#8221; 1.31mtpa capacity expansion in Congo is moving forward. This strategic investment is driven by the fact that<strong> LUCK<\/strong>&#8216;s overseas operations are already running at over <strong>90% capacity<\/strong>. In a demonstration of capital discipline, the company also confirmed it did not proceed with its bid for Pakistan International Airlines (PIA), as management concluded that the &#8220;valuation did not align with their risk appetite.&#8221;<\/p>\n\n\n\n<p>Furthermore, management highlighted that its subsidiary, Lucky Electric Power Company Ltd (<strong>LEPCL<\/strong>), is expected to benefit from the availability of indigenous Thar coal by the end of December 2026, which should improve its merit order and utilization. The company also noted a potential mining venture that may require over US$500mn in CapEx if reserves are confirmed, with the investment shared among partners.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Navigating Market Headwinds<\/strong><\/h4>\n\n\n\n<p>The company anticipates <strong>minimal impact<\/strong> from the recent <strong>Afghan border closure<\/strong>. This resilience is supported by two key factors: exports to Afghanistan account for only <strong>8-9% of total exports<\/strong>, and international coal prices remain soft at around <strong>US$95\u2013100\/ton<\/strong> on a landed basis, which helps maintain an average coal cost of approximately <strong>Rs34k\/ton<\/strong> and mitigates pressure on input costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>A Compelling Case for Growth<\/strong><\/h3>\n\n\n\n<p>JS Global&#8217;s &#8220;Buy&#8221; rating for <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/luck\/\" data-type=\"post_tag\" data-id=\"10\">LUCK<\/a><\/strong> is backed by fundamental improvements in its core cement business, which are driving stronger margins and higher earnings forecasts. This core strength, combined with a valuable diversified portfolio and management\u2019s demonstrated capital discipline, creates a compelling investment case and fully underpins the company&#8217;s uplifted valuation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Bullish Upgrade JS Global is upgrading its stock rating for LUCK to Buy from a previous Hold. We are raising our Sum-of-the-Parts (SoTP) based Target Price (TP) from Rs480\/sh to Rs570\/sh, implying a 17% upside from the current market price. The central thesis for this positive revision is a stronger contribution and an improved [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":6838,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[10],"class_list":["post-12228","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-psx-blog","tag-luck"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/LUCK-STOCK-PSX-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/LUCK-STOCK-PSX-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/LUCK-STOCK-PSX-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/LUCK-STOCK-PSX.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/12228","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=12228"}],"version-history":[{"count":1,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/12228\/revisions"}],"predecessor-version":[{"id":12229,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/12228\/revisions\/12229"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/6838"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=12228"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=12228"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=12228"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}