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.