Karachi – The Lucky Cement Company (LUCK) has started to consider options of transmitting surplus power to its group companies, as nothing has been done by Karachi Electric Supply Corporation (KESC) in spite of signing an MoU with the company.
LUCK enjoys a surplus power capacity of around 75-80 MW by dint of its waste heat recovery project (WHRP) and captive power plant, and the company signed an MoU with KESC to transmit 40MW of electricity in October this year.
Failure of getting this surplus transmitted under the agreement, the company has started considering other options of transmitting this surplus power to its group companies, Abid Ali at Arif Habib stated.
The company has commissioned WHRP of Pezu in October 2010, whereas WHRP of Karachi Plant was commissioned in FY10. This will cumulatively generate 25MW with an expected 20 percent power cost savings with an annualized EPS impact of Rs 1.75.
The Scrip LUCK has increased by 23.8 percent since July 1, 2010, outperforming the benchmark KSE-100 Index by 7.8 percent. Despite this strong performance at the KSE, it is believed that the stock still has lot to offer, with a 22 percent upside potential to June11 target price of Rs 92.5 per share. With increasing competition and declining margins in the Middle Eastern region,
Lucky has refocused on the domestic front, evident from 15 percent YoY increase in domestic sales during 5MFY11, against 9 percent YoY decline suffered by the industry in the same period.
Despite recent price shocks in Northern region, a stable price outlook in FY11 with limited possibility of a price war is expected. Cement players have learned the lesson from the price war of FY10 in which nobody turned out to be a winner. Besides cost pressures from rising coal prices would also limit the downside of any price drop in winter.
