D.G. Khan Cement (DGKC): 2QFY19 EPS Rs3.0, +69% YoY (+253% QoQ); (Above expectations)
- DGKC’s 2QFY19 consolidated result was better than our estimates mainly on the back of tax benefit of up to Rs1.1/sh. Gross margins also fared better than expectations. We attribute both tax benefit and higher gross margins to better utilization of South plant. To note, the company is entitled to a 5-Year tax holiday on South plant which came online in 2H2018.
- Cement revenues were higher 41% YoY in 2QFY19 mainly due to higher volumes from the new line. Gross margins fell by 13ppts YoY to 19% during the outgoing quarter on the back of higher input costs and additional depreciation expense charged on new (South) plant. However, cement margins were higher QoQ by 6ppts thanks to better utilization of South plant.
- Financial charges on the other hand were higher by 6.9x YoY, due to higher debt levels (for financing of new cement line that came online in 2H2018) and increase in interest rates (+450bps since Jan 2018 to date to 10.25%).
- We flag 1) further decline in cement prices, 2) unanticipated increase in gas and coal prices and 3) lower than expected local cement demand as key risks for DGKC.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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