DGKC: Upside remains despite recent rally; Neutral
- We revise up and roll forward (to Dec’17) DGKC’s SoTP based TP to PkR269/sh (+6%). Our target price now incorporates 2QFY17 results and increase in portfolio contribution to PkR80/sh (from previous PkR73/sh).
- Earnings during 2Q rose 10%YoY, due to 15%/4%YoY increase in local/export dispatches and lower effective tax rate of 22%; however, pre-tax profits remained flattish YoY in 2QFY17 (up 9% YoY in 1HFY17). Gross margins during 2Q were flattish YoY, but dropped 2ppts QoQ on increase in Coal/FO prices.
- Despite valuation convergence with 6% CYTD outperformance vs. IMS Cement Universe, we see more room for upside as the stock still offers 24% discount vs. other peers on EV/EBITDA. Inclusion of North expansion and potential stake in Hyundai-Nishat Auto assembling unit are upside trigger to our valuation.
Co. is engaged in the production and sale of Ordinary Portland and Sulphate Resistant Cements.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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