Karachi : Lucky Cement being the star of the cement industry is on the final stages of completion of its “Tyre derived fuel (TDF)” plants which would utilize disposed shredded tyres as a replacement of coal for cement production.
According to Alfalah Securities, the plants costing PKR 1bn is located at the cement production facility in Karachi and is capable of producing cheaper cement along with reducing significant carbon emissions in the environment. The plant would also increase the efficiency of the cement production facility as it contains an equivalent amount of energy content as compared to oil while, it contains 25% excessive energy as compared to coal. Apart from TDF, Lucky Cement is also seeking to use other alternative fuels such as raw materials from municipal solid waste (MSW) and rice husk to act as “Refused Derived Fuel” which would further cut the cost of production. Hence, Alfalah Securities expects Lucky Cement would benefit from the commissioning of the TDF plant as their gross margins would improve significantly while it would also benefit from cement exports owing to expected weakening of Pak Rupee against the USD. Hence, based on its projections Alfalah Securities recommends a “Buy” stance on the scrip which trades at an attractive FY12F P/E of 5.2x and offers an upside of 25.6% to its target price of PKR 102.07 per share.