Lucky Core Industries Limited (formerly ICI Pakistan Limited) announced its 3QFY23 financial result today where the company posted a profit after tax (PAT) of PKR 18.9bn (EPS: PKR 204.98), up by 9.4x YoY compared to PKR 2.0bn (EPS: PKR 21.79) during SPLY. The uptick in earnings was due to gain on partial disposal of NutriCo Morinaga (PKR 8.9bn) and remeasurement gain on retained interest in NutriCo Morinaga (PKR 8.2bn), and higher PSF margins, we view. On a QoQ basis, earnings were also up by 15.4x. This takes the 9MFY23 earnings to PKR 22.0bn (EPS: PKR 237.74), up by 181% YoY.

Result Highlights

· During 3QFY23, net sales surged up 19% YoY to PKR 30.8bn due to higher sales across all segments, supporting the overall jump. However, sales of NutriCo Morinaga were not included during 3QFY23 due to a change in its classification, from a subsidiary to an associate.

· Gross margins went up by 115bps YoY to 23.0% during 3QFY23. The rise in gross margins was led by better performance of PSF segment along with lower coal prices, we view.

· During 3QFY23, LCI booked an exchange loss of PKR 729mn amid PKR depreciation.

· Finance costs of the company went up by 135% YoY | 39% QoQ to PKR 800mn during 3QFY23 due to augmented short-term borrowing along with higher interest rates.

· The company booked a gain on partial disposal of NutriCo Morinaga (Pvt) Ltd (PKR 8.9bn) and a remeasurement gain on the retained interest of the same (PKR 8.2bn).

Material Information

· The board of the company has approved PKR 1.55bn investment for the Soda Ash business.

Recommendation

· We have a BUY call on the scrip with a Dec’23 target price of PKR 890.20/share. After the announcement of 3QFY23 result, we have revised upwards our FY23 earnings to PKR 261.92/share.

Courtesy – AHL Research