Update Pulse April 22, 2011

against PKR9.74bn in last year. The upsurge in cost of sales

Cement: DGKC – 9MFY11 is mainly due to rising energy and transportation costs. In
financial performance preview… 9MFY11, we expect gross profit of the company to witness
an upsurge of 28% YoY to PKR2.70bn against PKR2.12bn in
BUY
Pakistan Research

Synopsis… 9MFY10.
D.G. Khan Cement Company Ltd (DGKC) is scheduled to
announce its operating results for 9MFY11 on Monday 25th Other income to continue playing role of a savior…
April’11. We expect company to post Profit after Tax (PAT) of We expect other income to post a rise of 8% YoY to Market Snapshot
PKR398m translating into an EPS of PKR1.09, posting a PKR761m in 9MFY11 against PKR703m in 9MFY10. The Index Chg %
modest growth of 3% YoY against the corresponding period KSE 30 11579.97 135.02 1.18
main reason behind the upsurge in other income is dividend KSE 100 11923.59 178.53 1.52
of last year when company had recorded PAT of PKR388m that company have received by company from MCB bank. KSE ALL 8302.16 115.45 1.41
and EPS of PKR1.06 respectively. In this report we will This augment in other income seems to be playing role of a
present our result expectations and future outlook. savior as excluding other income, core operations post a
substantial decline of 67% YoY (LPS of PKR 0.29). On the Key Data
(PKRm) 9MFY10A 9MFY11E Chg other hand, financial charges are expected to increase by Market Cap(PKR bn) 8.99
Sales 11,851 13,126 11% 10% YoY to PKR1.56bn in 9MFY11 against PKR1.43bn in Shares Outstanding (m) 438.12
Bloomberg DGKC.PA
Cost of Sales 9,739 10,425 7% the same period last year. 12M Avg. Volume (m) 3.34
Gross Profit 2,112 2,701 28%
Operating Profit 1,299 1,560 20% Future Outlook and recommendation…
Cement sector showed a lackluster performance as its 9M
Other income 703 761 8%
cumulative local and export dispatches declined by 8% YoY
EBIT 1,865 2,161 16% and 14% YoY respectively. However, on MoM basis (March
Financial charges 1,422 1,558 10% over Feb ’11), both local and export dispatches witnessed an
Profit before Tax 444 603 36% upsurge of 25% and 16% respectively. In our view, improved 150% 12M DGKC relative performance vs KSE

Taxation 55 205 270% dispatches in March’11 is a sign of recovery in demand. We DGKC KSE-100
125%
expect export to increase in remaining months of FY11 as
Profit after tax 388 398 3%
there is a consistent demand from Afghanistan and also 100%
EPS (Basic) 1.06 1.09 exporters have started exporting to India as BIS India has 75%
Gross Margins (%) 18% 21% renewed licenses of majority of the cement exporters. We
50%
Oper Margins (%) 11% 12% expect DGKC to reap the benefit of improving exports going

Apr-10

Aug-10

Apr-11
May-10

Oct-10
Jun-10

Sep-10

Dec-10

Jan-11

Feb-11

Mar-11
Jul-10

Nov-10
Net Margins (%) 3% 3% forward.
Source: Company accounts, Summit Capital Research
We maintain our BUY stance on scrip as at yesterday’s
Top line to post 11% YoY rise… closing price it offers an upside potential of 58% to our SOTP
We expect DGKC to post 11% YoY rise in sales during based fair price of PKR39.
9MFY11 to PKR13.12bn against PKR11.85bn in the same
period of the last year. Our expectations for the augment in
sales is attributed to slightly improved exports and better
retention prices. However, slow down in local demand is Muhammad Sarfraz Abbasi
likely to restrict growth in sales. We expect cost of sales to Sarfraz.abbasi@summitcapital.com.pk
post an increase of 7% YoY to PKR10.42bn in 9MFY11 as 021-35376125
against PKR9.74bn B-209, Park Towers, Clifton, Karachi

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