Lucky Cement earnings in line with markets expectations

Lucky Cement (LUCK) announced its 1QFY26 results today, recording consolidated earnings of Rs21.99bn (EPS of Rs15.0), up by 23% YoY and 12% QoQ, in line with our expectations. Alongside the result, the company did not announce any cash dividend, as expected, according to a report by Topline Pakistan Research. On consolidated basis, net revenue increased by 11% YoY and by 6% QoQ to Rs123.6bn. The YoY increase in revenue is due to higher revenue from Local Cement and Lucky Motors (in line with the auto industry sales trend), we believe.

Finance costs declined by 40% YoY, mainly due to lower debt levels and lower interest rates. The company recorded gross margins of 25.5% in 1QFY26 compared to 24.2% in 4QFY25 and 28.4% in 1QFY25.

Share of profit from associates increased by 27% YoY and 11% QoQ to Rs5.4bn.

The company’s standalone profit increased by 2.23x YoY and 2.54x QoQ to Rs9.98/share in 1QFY26. The increase in unconsolidated earnings was primarily driven by a ~130% YoY increase in other income, mainly due to the Rs6bn dividend received from Lucky Electric Power Company (LEPCL) in 1QFY26.

On a standalone basis, the company posted gross margins of 39% in 1QFY26, compared to 33% in 1QFY25 and 36% in 4QFY25. The YoY margin improvement was driven by an 18% increase in domestic cement dispatches, higher reliance on renewable sources, and lower coal prices.

In a standalone business, the company recorded an effective tax rate of 25% in 1QFY26 compared to 33% in 1QFY25. While on a consolidated basis, ETR remained at 21.3% vs. 19.7% in 1QFY25.

We maintain our BUY stance on LUCK, which is currently trading at FY26E/27F PE of 6.9/5.8x, respectively.