DG Khan Cement Limited (DGKC) has scheduled its board meeting on Sep 21’15 to announce financial result of FY15.
We anticipate the company to announce earnings of PKR 7,197mn (EPS: PKR 16.43) for FY15, escalating by 21% YoY in comparison with FY14 earnings of PKR 5,965mn (EPS: 13.62). Growth in earnings can largely be attributed to reduction in distribution costs, decline in financial charges, and an increase in other income. On a quarterly basis, however, earnings are estimated to fall by 10% YoY (-8% QoQ) to PKR 1,822mn (EPS: PKR 4.16) during 4Q FY15. Earnings on a quarterly basis are likely to be marred due to the high tax during the last quarter and the high base set during 4Q FY14 on account of reversal of GIDC. Along with the result, we anticipate the company to announce a final cash dividend of PKR 4.00/sh for FY15.
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Source: Global Research, Company Accounts
- The company’s revenue is estimated to decrease by 2% YoY during FY15 to PKR 25,986mn because of a 3% YoY drop in company’s total off-take to ~3.85mn MT. Margins of the company are expected to remain stationary at 35% for the year, since the company had to book previous year’s GIDC reversal charges during the year, offsetting the positive effect of lower energy and power costs.
- Despite lower gross profit, we believe the company will book an increase in bottom-line owing to a decrease in distribution and finance costs by 45% and 43% YoY, respectively. Decrease in distribution cost can be mainly attributed to the ~36% YoY decrease in exports because of lower demand from Afghanistan and imposition of anti-dumping on Pakistan’s cement by the South African government. Finance costs on the other hand are estimated to witness a decrease on back of de-leveraging and monetary easing. Furthermoremore, the company’s other income is estimated to surge by 35% YoY due to higher dividend income on investments during the year.
- We anticipate the company to register an effective tax rate of 19%, down by 6pps YoY during FY15 on account of group taxation relief. We estimate the additional super tax to decrease the company’s bottom line by PKR 273mn for FY15 (EPS impact: PKR 0.62/sh).
Our Jun16TP for the share stands at PKR 164/sh, offering an upside of 22% and a dividend yield of 3%. BUY!