D.G.Khan Cement Company Ltd : Project visit provides insights into Pakistan’s largest cement plant
- We recently organized a project visit of DG Khan Cement Company Limited’s (DGKC) Hub plant for our clients, in order to get a firsthand update of progress on construction of Pakistan’s largest cement plant.
- Key takeaways include: (i) increased visibility on timely commencement of country’s largest & one of the most energy efficient cement project (expected by Jun'18), (ii) focus on operational efficiency ensuring multiple benefits, and (iii) DGKC developing multiple power generation options without significant incremental cost.
- Management has already started working on WHR project (likely within 2-mths of operations) while possibility of freight cost saving via coal imports from nearby jetty (to be setup by 2020) remains.
- DGKC’s stock price has shed 17% in past 1-mth over concerns on pricing in South region post commissioning of its plant; while we do not rule out possibility of price softness in near-term (6-8% incorporated), we expect the project to be value accretive for DGKC.
- Trading at a forward P/E of 6.4x (23% discount), we reiterate our Buy call on DGKC with Jun'19 DCF-based SoTP of PKR208, offering 51% total return from current levels.
Co. is engaged in the production and sale of Ordinary Portland and Sulphate Resistant Cements.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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