D.G. Khan Cement (DGKC) Q3 earnings preview
Taurus Research has just released an update on its coverage of DGKC stock. Here are the important points from their DGKC earnings preview:
Decline in Profitability
In the upcoming quarterly report for 3QFY24, D.G. Khan Cement (DGKC) is anticipated to announce a Profit After Tax (PAT) of PKR 732 million. This figure indicates a notable 38% year-on-year decrease. However, on a sequential basis, the company is poised to experience a significant 86% surge in PAT. This boost can be primarily attributed to higher retention prices and a cost-effective fuel mix that bolsters margins.
Dispatch Declines Impact Revenue
During the quarter under review, total dispatches are expected to decrease by approximately 23% quarter-on-quarter (QoQ). This decline is largely driven by a substantial 56% QoQ decrease in exports. Moreover, local dispatches are also anticipated to experience a 10% QoQ decline.
Revenue Projection
We anticipate DGKC’s revenue to reach PKR 16 billion, signifying a 12% decrease both QoQ and YoY. This reduction is primarily attributed to the decrease in dispatches during the quarter.
Gross Margin Analysis
The projected gross margins are expected to stand at 18%, showcasing a notable 6 percentage points increase on a quarterly basis. This enhancement can be attributed to lower coal prices and the absence of a one-time maintenance charge incurred in the previous quarter.
Financial Costs and Other Income
Finance costs are projected to witness a 24% year-on-year increase. This rise is driven by elevated interest rates, exerting downward pressure on the company’s profitability due to high leverage. Conversely, other income is expected to rise by 56% year-on-year, supported by increased dividend income from MCB.
Dividend Payout Expectation
Finally, it is anticipated that DGKC will not announce any cash dividend payout for the quarter.
| Particulars (PKR Mn) | 3QFY24E | 3QFY23A | YoY | 2QFY24A | QoQ | 9MFY24E | 9MFY23A | YoY |
|---|---|---|---|---|---|---|---|---|
| Sales | 16,145 | 18,282 | -12% | 18,267 | -12% | 50,929 | 48,043 | 6% |
| Cost of Sales | (13,164) | (14,802) | -11% | (15,937) | -17% | (42,405) | (40,306) | 5% |
| Gross Profit | 2,980 | 3,480 | -14% | 2,330 | 28% | 8,523 | 7,737 | 10% |
| Administrative Expenses | (261) | (219) | 19% | (295) | -12% | (841) | (645) | 30% |
| Selling & Distribution Expenses | (612) | (539) | 13% | (693) | -12% | (1,814) | (1,048) | 73% |
| Other Expenses | 8 | (38) | -1.2x | 9 | -12% | (58) | (160) | -64% |
| Other Income | 1,182 | 756 | 56% | 1,337 | -12% | 3,345 | 2,149 | 56% |
| Finance Cost | (2,079) | (1,673) | 24% | (2,028) | 2% | (6,194) | (4,876) | 27% |
| Profit Before Taxation | 1,218 | 1,767 | -31% | 660 | 85% | 2,961 | 3,157 | -6% |
| Income Tax Expense | (486) | (586) | -17% | (266) | 83% | (1,175) | (1,045) | 12% |
| Profit After Taxation | 732 | 1,180 | -38% | 394 | 86% | 1,786 | 2,112 | -15% |
| EPS | 1.67 | 2.69 | 0.90 | 4.08 | 4.82 |
Disclaimer
The information in this article is based on research by Taurus Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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