DGKC: Beneficiary of the monetary easing cycle

JS Global has given a “Buy” rating with a Dec-2025 target stock price of Rs. 140 for DGKC in their recent report. We expect DGKC to be a key beneficiary of the monetary easing cycle in our Cement universe, with a significant improvement in the interest coverage ratio from 1.37x in FY24 to 2.28x in FY25E and further to 3.9x in FY26E. DGKC’s core business margins are projected to improve due to the gradual convergence of North and South prices and a better sales mix, though a lower-than-expected recovery in domestic demand and prices remains a key risk.

DGKC’s diversified equity portfolio is a major contributor to its valuation, including sectors such as Textiles, Banking, Auto, Insurance, and Paper & Dairy, with MCB Bank alone contributing 70% or Rs46.3/share to the SoTP-based valuations. Our Dec-2025 SoTP-based target price for the stock stands at Rs140, providing a 40% upside from current levels. The ongoing monetary easing is anticipated to reduce financial charges, boosting valuation multiples, despite recent pressure on cement prices in the Northern region.

We have revised our earnings downwards for FY25E due to this recent price pressure, but we expect a rebound in cement prices in the latter part of FY25E driven by increased local demand and ongoing monetary easing. DGKC recorded the lowest gross margins in our cement universe for FY24, mainly due to low local retention prices and unfavorable export prices, particularly from its southern region operations. The company reported an export price of Rs47/bag in FY24, which fell short of covering the variable cost of Rs42/bag due to a high proportion of clinkers in its export dispatches. However, we anticipate an improvement in the export sales mix and higher southern MRPs as demand recovers, which should enhance DGKC’s margins going forward.