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Lucky Core Industries Limited (LCIL) reported a remarkable 120.4% increase in its profitability, with net profit jumping to Rs13.77 billion in the fiscal year ending on June 30, 2023, from Rs6.24 billion recorded in the previous fiscal year. The factors that pushed the net profit include the efficient operating performance combined with one-time profit from the sale of NutriCo Morinaga Private Limited (NMPL). Similarly, the company posted a net turnover of Rs109.48 billion in FY23.

This constitutes a remarkable increase of over 25.9% from Rs86.97 billion recorded in FY22. The company attributed this increase to the higher volume of sales and high sale prices due to increased inflation during the period. As a result, the LCIL's net profit margin grew to 12.58% in FY23 from 7.18% in FY22.

Gross profit also grew substantially over 19.90%, reaching Rs22.32 billion in FY23 from Rs18.6 billion in FY22. However, the gross profit margin fell marginally to 20.39% in FY23 from 21.41% in FY22. During FY23, the administrative and general expenses grew by 24.51% to Rs2.33 billion from Rs1.87 billion in FY22. Operating results grew by over 24.67% from Rs11.75 billion in FY22 to Rs14.65 billion in FY23.

Additionally, profit-before-tax displayed a growth of over 114.83% during the period under review. The surge in net and gross profits translated into outstanding earnings per share (EPS) of Rs149.12 for FY23, a considerable rise from Rs67.66 in FY22.

Historical trend

The company observed an upward trend in net turnover, increasing from Rs58.3 billion in 2019 to Rs109.48 billion in 2023, with one dip of Rs53.59 billion in 2020. This increase was the result of ongoing investments in cost-push price changes for business expansion. The 2020 decline was brought on by the Covid-19 pandemic, which caused shutdown of the polyester factory, and a decline in petrochemical pricing.

Operating results grew gradually over the period, reaching Rs14.6 billion in 2023 from Rs4.9 billion in 2019 because of continuous business expansion, the launch of new products, and efficient cost management. Net profit expanded gradually from Rs2.3 billion in 2019 to Rs6.2 billion in 2022, and then surged to Rs13.7 billion in 2023 thanks to growth in polyester, soda ash, animal health, and chemicals and agri-sciences businesses.

Profitability ratios analysis

The company's maximum gross profit margin of 22.91% was recorded in 2021 and a minimum of 16.2% in 2019. The net margin grew from 3.95% in 2019, reaching the highest of 12.58% in 2023. Similarly, the return on equity increased from 12.39% in 2019 to 36.41% in 2023, with a dip in 2022. The company earned a 17% return on assets in 2023 compared to 5.3% in 2019.

Liquidity ratios analysis

The current ratio evaluates the extent to which the company's current assets may be used to pay off its short-term liabilities. The fact that LCIL's current ratio stayed over 1.2 in 2020, 2021, and 2023 shows that the business had enough cash on hand to meet its immediate liabilities. Nonetheless, it was regarded as very stable at 1.13 in 2019 and 1.01 in 2022. However, the company's quick ratio consistently stayed below 1, indicating that it lacked the liquid assets necessary to meet its obligations.

Credit: INP-WealthPk