Valuation:

We have used discounted cash flow (DCF) methodology to value the company. The current market price of LUCKY cement is 75.5 per share approx as on dec 28 2011.

We have calculated WACC of 14.87%. in WACC computation ,the CAPM based calculation of cost of equity (RE) of 19.94%(Risk free rate of 12.5%, Risk premium of 6% and beta of 1.24) we take beta from Bloomberg and terminal growth rate from past industry trend while cost of debt is 6.76% as per financial statement.

Distribution of capital structure:

shareholder equity 27,772,829

Debt 10,696,789

total equity 41,209,855

Data for computation:

Following data is taken from the financial statement of Lucky Cement fiscal year 2011 and from the related financial websites and KSE 100 index. The beta of the Lucky cement is taken from Bloomberg while the market return is taken from the history of KSE and use risk free rate 12.5%.

beta 1.24rf 12.5%rm 29%

CAPM 33%

Calculation for WACC:

Lucky Cement

2011Total Capital 41,209,85

5Total debt 10,696,78

9Share holders equity 27,772,82

9

Weight of Equity 0.67

Weight of debt 0.26

cost of equity 0.33cost of debt

0.07 Tax Rate 35%

wacc 0.23

The above given detailed is taken from financial statement of lucky cement and on the bases of these we calculated weighted average cost of capital of 23%.

Valuation of FCFF:

Valuation of FCFF 2011 2012 2013 2014 2015

Total Capital 41,209,855 44671482.82 48423887 52491493.92 56900779.41Present value of FCFF @ 23% 36318278.72 32007329 28208084.68 24859807.96Present value of FCFF 121,393,500PKR

Discounted cash flow valuation:

We have used discounted cash flow(DCF) methodology to value the company. Our targeted price of the company for December 2011 is PAK Rs 108.8 per share. we have calculated WACC of 23%. In which we take CAPM of 33% and beta of the lucky cement is taken from Bloomberg financial web site.

2011 2012 2013 2014 2015Sale 26,017,519 33,562,599 43,295,752 558,515,200 720,484,608Net Income 3,970,400 5034389.85 6494362.8 83777280 108072691.2Capx 1,905,143 3356259.9 4329575.2 55851520 72048460.8Working Capital 1,691,652 6712519.8 8659150.4 111703040 144096921.6Depreciation 1,570,545 1678130 2164788 27925760 360242300.70 × [Capex – Dep + Inv(WC)] 21,060 4698763.86 6061405 78192128 100867845FCFE=Net Income -0.70 × [Capex – Dep + Inv(WC)]3,949,340 335626 432958 5585152 7204846Present value of FCFE @ 23% 307914 364412 4312762 5104095

Stock value (Terminal) 216145382Present value @ 23% 153122838Present value of FCFE 10089182Total Value of firm 163212020No. of outstanding Shares 1,500,000Price per Share 108.808