Expensive Coal, Tax Reversals Drag DGKC’s Margins
D.G Khan Cement Limited (DGKC) posted earnings of PKR 896 million (EPS: PKR 2.05) in 2QFY18, which is 65.5% lower than the corresponding period last year. The company reported an increase of 1.8% YoY in its topline, although total dispatches increased by 5.4% YoY. During 2QFY18 the gross margin of the company declined to 31.05% from 42.2% in the same period last year. The net margin of the company declined to 10.9% during 2QFY18 from 32.1% in the SPLY. After incorporating the hike in risk-free rate and revising our assumptions regarding cement prices, we have updated our target price for December-18 to PKR 199 from previous December-18 TP of PKR 216.7. Our new target price still offers an upside of 21% to the company’s last closing share price; hence, we are maintaining our positive stance on the scrip. Please note that according to recent notice by DGKC, the resolution has been passed for the investment of PKR 850 million in Hyundai Nishat Motors (Private) limited, which we have not yet incorporated in our model as we are awaiting further information.
Co. is engaged in the production and sale of Ordinary Portland and Sulphate Resistant Cements.
Ismail Iqbal Securities (Private) Limited (IISPL) is a TREC holder of the Pakistan Stock Exchange, as well as an SECP registered Underwriter and Book Runner. IISPL provides comprehensive financial services including Equity Sales, Research on Equities and the Macro-Economy, Investment Advisory, Portfolio Management, Corporate Finance, and extensive services for Private Equity investors. IISPL services a diversified client base, from Institutional to Retail Investors including High Net worth Individuals.
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