Lucky Cement expected to bloom with 12% revenue growth

Lucky Cement Limited (PSX: LUCK) — Fair Value Narrative

Proposed fair value: Rs 608 – 668/share (vs. current price ~Rs 458.63 and Simply Wall St's default estimate of Rs 511.80)

Thesis

Lucky Cement just closed FY2026 (year ended June 30, 2026) with audited consolidated EPS of Rs 60.78, up 15.7% year-on-year — and unlike a lot of "growth" showing up across Pakistani equities this reporting cycle, this one is mostly real. Pre-tax profit grew 9.9% on genuine operating strength (core cement gross margin expanded to 37.5%, the highest in a ten-year window, on higher domestic volumes and disclosed cost-optimization initiatives), with the gap to 15.7% PAT growth explained by a lower effective tax rate rather than an accounting one-off. That's a meaningfully cleaner earnings print than it might first appear, and the market hasn't caught up to it yet — the stock still trades at roughly 7.5–8x this freshly reported EPS, against a business generating ROE in the mid-20s% and now sitting close to net-debt-free at the group level.

Key value drivers

Core cement business firing on both volume and margin. Domestic cement demand grew 9.3% industry-wide in FY2026 as inflation eased and interest rates stabilized; Lucky's own local volumes grew faster still (+10.1%), taking share. Gross margin expansion (34.3% → 37.5%) came from genuine efficiency gains — optimized energy mix, battery storage systems, and UTIS kiln technology now commissioned across all four Karachi production lines — not just favorable pricing.

A diversified, cash-generative group structure. Beyond cement, Lucky owns Lucky Electric Power Company (LEPCL, a 660MW regulated power plant whose dividend to the parent doubled this year to Rs 12bn), Lucky Core Industries (chemicals/pharma), and Lucky Motor Corporation (Kia/Peugeot assembly, riding a 43% industry-wide volume recovery in FY2026). This diversification means the investment case isn't a single-commodity bet on cement pricing.

Real balance sheet strength. Total debt was essentially flat year-on-year even as the group grew earnings double digits — deleveraging is happening through earnings growth and liquidity building, not asset sales. (Note: the precise net-debt figure depends on whether short-term investments are counted as a cash offset — see Risks below — but total debt itself did not increase.)

Active growth pipeline, not a mature/harvest-mode business. A cement grinding mill in Samawah, Iraq (0.65 MTPA) came online in November 2025; the DRC (Congo) joint venture is expanding capacity from 1.31 to 2.91 MTPA with construction starting in 1Q FY2027; a 33.33%-owned copper-gold exploration JV in Balochistan (National Resources Ltd) is progressing toward a mineral resource estimate following an April 2025 discovery announcement; and solar capacity at the Karachi plant is being expanded by another 15MW.

Assumptions used for this fair value