Today we would present our forecast on future performance of
D.G. Khan Cement Company Ltd. (DGKC) in the coming years.
Earnings are expected to grow at 3-year CAGR of 10%
Earnings of the company will grow at a 3 year CAGR of 10% to Rs 7.24 billion (EPS Rs 16.53) in FY16 against Rs 5.96 billion (EPS Rs 13.62) in FY14 mainly due to higher cement prices and lower coal prices. We expect higher retention prices in FY15 which may surge to Rs 7,038/ton increasing by 6% YoY likely driven by increase in the cement prices by 8% during the ongoing fiscal year. Gross margins likely to further improved to 37.2% in FY15 against 34.9% in FY14.
Easing monetary policy & reduction in debt- one more advantage
In last two months, the central bank is adopting a policy of monetary easing due to which it had reduced the key discount rates by 50 bps. This would helped the company to reduce its financial cost by 35% YoY to Rs 394 million in FY15 against Rs 609 million in FY14. Company has significantly reduced its debt along with decline in KIBOR which will keep the markup cost on lower side
MCB dividend boost other income
Other income of the DGKC remained sizeable owing to decent dividend payout by the associated companies. Other income likely to surge by 7% to Rs 1,766 million versus Rs 1,647 million in FY14 mainly due to higher dividend received from MCB which contributed
around 78% of other income.

 

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