Can DGKC reach 240 per share? These analysts think so

Key Takeaways

• DGKC’s target price revised to Rs. 240/share, implying a 60% upside.
• Export sales up from 15% to 25%, boosting FY26 EPS estimate by 45% to Rs. 27.1.
• DGKC is the cheapest cement stock on a FY26 PE basis and a top pick in the sector.

DG Khan Cement: A Rising Star in Pakistan’s Cement Sector

DG Khan Cement (DGKC) is catching investor attention with a significant earnings revision, driven by booming exports and reduced input costs. The stock is now trading at just Rs. 151, but analysts have revised the target price to Rs. 240/share, offering a compelling 60% upside.

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As the fifth largest cement producer in Pakistan with 9% local market share, DGKC has also emerged as the second largest cement exporter, accounting for 19% of total cement exports. This growing export focus has translated into strong top-line growth—export contribution rose to 25%, up from 15% a year ago.

Better Margins, Lower Costs

A key driver behind this optimism is the drop in coal prices. Coal makes up 55% of DGKC’s total production cost, and recent declines (17% drop in Richard Bay coal prices) have pushed gross margins higher. DGKC’s gross margins are now projected to average 29% over the next 3 years, up from 14% over the past five.

Add to that the improved export pricing—now estimated at US$45-48/ton—and the company’s FY26 EPS estimate has been raised by 45% to Rs. 27.1/share. Analysts are forecasting an earnings CAGR of 23% over the next three years, signaling robust growth.

Financial Muscle and Future Payouts

With average EBITDA expected to be Rs. 25 billion annually, DGKC is well-positioned to repay its debt within three years, freeing up resources for future dividends. Its finance costs are expected to decline, further boosting profitability.

Dividend payouts are likely to resume, with expected yields of 5% from FY26 onward—a welcome development for long-term shareholders.

Valuation Appeal: Cheapest in the Sector

On a forward PE basis (FY26), DGKC is trading at just 5.6x, the lowest in the industry. This compares favorably to the sector average of 6.5x, making it an undervalued gem. The stock also boasts one of the lowest EV/ton valuations at US$37, well below the industry average of US$49, and deeply discounted against the replacement cost of US$65-70/ton.

Historically, DGKC traded at a 17% premium to peers, but it’s now available at a 24% discount—a rare opportunity for value investors.

SOTP Valuation: Rs. 240/Share

The sum-of-the-parts (SOTP) valuation reveals the hidden strength in DGKC’s diversified portfolio, which includes stakes in MCB Bank, Nishat Mills, Nishat Dairy, and Hyundai Nishat Motors.

• The core cement business is valued at Rs. 175/share (DCF-based).
• The investment portfolio adds Rs. 65/share, even after applying a 35% discount on its total value of Rs. 98/share.
• Notably, 68% of this portfolio is tied to MCB, where DGKC holds over 102 million shares.

Despite this, DGKC’s share price is trading at only a 53% premium to its portfolio value, below the 10-year average premium of 74%, leaving more room for upward re-rating.

From earnings growth and debt reduction to undervaluation and a robust investment portfolio, DG Khan Cement checks all the right boxes. With a revised target price of Rs. 240/share and a compelling valuation case, DGKC has become Sherman Research’s top pick in the cement sector, replacing MLCF.

For investors seeking a blend of value, growth, and upside potential, DGKC is hard to ignore.

Source: Sherman Securities

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →