Morning Pulse Jun 03, 2010

CEMENT SECTOR
DGKC – 9M/FY10 Detailed Accounts Analysis… Analyst:
Sarfraz Abbasi
Synopsis… sarfraz.abbasi@atlascapital.com.pk
The financial performance of D.G. Khan Cement Company Ltd (DGKC) was (+92-21)-111-226-100 (Ext.403)
impressive during 9M/FY10 as the PAT of the company increased to PRs388.17m
compared to PRs321.12m recorded during the corresponding period of last year.
For 3Q/FY10 however, the company suffered a minor loss of PRs81.80m against a
PAT of PRs194.07m in 3Q/FY09. Still, cumulative performance of the company
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was momentous as EPS rose by 21.88% to PRs1.28 against EPS of PRs1.06 during Market Snapshot
the corresponding period of the last year. In today’s report we present detailed Index Chg %
accounts analysis of DGKC for 9M/FY10. KSE 30 9422.78 240.27 2.62
KSE 100 9499.06 204.88 2.20
9M/FY10 Operational Performance - Low prices big fear… KSE ALL 6662.38 147.38 2.26
During the period under review, local dispatches of the company increased by
24.00% to 1.28m tons Y-o-Y basis. This handsome growth in dispatches is mainly
attributable to the activities in housing sector and commercial activities even
though spending on development activities by the GoP remained inferior.
However, export sales witnessed a considerable decline of 34.00% in comparison
to 3.50% growth in industry cement exports. Resultantly, top line of the company Key Data
dropped by 10.00% to PRs11.85bn. During the 3Q/FY10, top line of the company Market Cap(PRs bn) 7.84
fell by13.76% to PRs3.89bn compared to PRs4.51bn during same period last year. Shares Outstanding (m) 365.09
Cost of sales on the other hand went slightly up by 3.00% to PRs9.43bn. Gross Bloomberg DGKC.PA
12M Avg. Volume (m) 10.04
profit witnessed a sharp decline of 43.42% to PRs2.11bn as the gross profit during
3Q/FY10 alone decreased by 64.24% to PRs407.50m when compared with the
corresponding period of last year. Other income of the company during
9M/FY10 increased by 19.13% to PRs703.04m with significant contribution of
40.77% (PRs232.32m) alone from 3QFY10.

9M/FY10 Profitability Performance…

Profit Before Tax of the company increased to PRs443.62m against the Loss
12M DGKC relative performance vs KSE-100
Before Tax of PRs80.88millon during the corresponding period of last year. Volume DGKC KSE 100
Extensive increase in PBT is mainly attributed to 31.00% percent decline in the 30.00 180%

financial charges owing to 14.19% decline in average total financing balance of

the company. During the period under review, the average borrowing (both 22.50 135%

short term and long term) stood at PRs6.57bn against PRs7.50bn in corresponding
(m shares)

15.00 90%
period of last year. In addition to this, during the 9M/FY10, average 6M KIBOR
(main reference rate for financing) was down by 1.97pps against 9M/FY09. 7.50 45%

During 3QFY10, Loss after Tax was PRs31.45m translating into Loss per share of
PRs0.27, showing a decline of 142.15%. 0.00 0%
Aug-

Apr-10
Oct-

Feb-
Jun-09

Nov-

Jan-

May-
Jul-09

Price war ending - Augmentation on the cards…

Prevailing prices in the domestic market are at historic low due to ongoing price Atlas Capital Markets (Pvt.) Ltd
war among the cement producers. Cement prices for the domestic market
B-209, Park Towers, Clifton, Karachi
started declining from the range of PRs.330.00-340.00 per bag back in July ’09 to
Equity Research: Equity Sales:
the current prices of PRs240.00-250.00 per bag in south region while per bag Tel: 92 (21) 5376125 Tel: 92 (21) 5368261-8
prices in north zone are in the range of PRs280.00-290.00. This all has put the Fax: 92 (21) 5376126 Fax: 92 (21) 5376122
cement industry in a depressed situation. We believe that the prices have seen Money Market: Corporate Finance:
the bottom and bounce-back is due as the domestic demand is gradually Tel: 92 (21) 5376128 Tel: 92 (21) 5824991
improving and we also believe that export sales will also see growth in the Fax: 92 (21) 5376129 Fax: 92 (21) 5376122
4Q/FY10 though with the slow pace. Financial Products Distribution:
Tel: 92 (21) 5376125
Fax: 92 (21) 5376126
Going Forward… Atlas Research is available on Bloomberg and
We believe that with improving demand both in domestic and export market, Thomson Financial
the prices will see a recovery with relatively slow velocity. However, with
Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time
of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Atlas Capital Markets (Pvt.)
Limited accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All
information is provided without warranty and Atlas Capital Markets (Pvt.) Limited makes no representation of warranty of any kind as to the accuracy or
completeness of any information hereto contained.
 ATLAS CAPITAL MARKETS (PVT.) LIMITED MORNING PULSE

anticipation of lapse of inland freight subsidy on exports through sea, the

negative impact on the segment is bound to happen. Beside this, there is also
news circulating that GoP may increase FED by PRs200 to PRs900 per ton, which
would further pressurize the already stressed demand. Our valuation for the
company is in process and we would be soon coming up with our
recommendation on the scrip.

(PRs m) 9M/FY09 9M/FY10 Chg 3Q/FY09 3Q/FY10 Chg

Net Sales 13,166 11,851 -10% 4,514 3,893 -14%
Cost of Sales 9,433 9,739 3% 3,374 3,486 3%
Gross Profit 3,733 2,112 -43% 1,140 408 -64%
Admin exp 100 124 24% 34 43 26%
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Selling & Distribution Exp 1,370 690 -50% 280 166 -41%
Impairment Loss 155 - -100% 155 - -100%
Operating Profit 1,986 1,865 -6% 775 434 -44%
Finance Cost 2,067 1,422 -31% 610 466 -24%
(Loss)/Profit Befor Tax (81) 444 -648% 165 (31) -119%
Taxation 402 55 -86% 29 50 74%
(Loss)/Profit After Tax 321 388 21% 194 (82) -142%
(LPS)/EPS (PRs) 1.06 1.28 21% 0.64 (0.27) -142%
Source: Company Accounts, Atlas Research