IGI Securities Limited – Flash Note (19-02-2021)

Karachi, February 19, 2021 (PPI-OT): D.G. Khan Cement Company Limited: Higher retention and lower finance cost lifts EPS by two folds to PKR 2.63 in 2QFY21

D.G. Khan Cement Company Limited (DGKC) announced its financial result for 2QFY21 with un-consolidated earnings clocking in at PKR 1,152mn (EPS: PKR 2.63), up by +98%y/y, as compared to PKR 581mn (EPS: PKR 1.33) reported in the same period last year. This brings 1HFY21 EPS to PKR 1.83 as against LAT of PKR 1.93 reported in the similar period of the preceding year.

Net Sales of the Company during 2QFY21 decreased by 4%y/y, largely led by lower dispatches made during the quarter. However on a sequential basis net sales increased by +8%q/q on the back of +17% q/q incline in sales volumes, higher retention and lower discounts.

Gross profit of the company jacked up by +54%y/y and +139%q/q respectively following improved retention and considerably restricted cost structure and softened coal prices towards lowered costs. However, we await detailed accounts for further analysis in this regard.

A steep 37%y/y decline in finance cost outweighed operating margins. This decline in finance cost is due to low borrowing requirement during the quarter and series of rate cuts in benchmark interest rates.

Along with the result the Company has decided to evaluate brown field capacity expansion to the tune of 9,000TPD-12000 TPD.

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