AKD Quotidian about — DGKC: 1QFY13 Result Preview

Karachi, October 22, 2012 (PPI-OT): D.G. Khan Cement Company Limited (DGKC) is scheduled to announce its 1QFY13 result on Oct 24’12. AKD Securities expects the company to post earnings of PKR 1.35 billion (EPS: PKR 3.09) compared to earnings of PKR 317.7 million (EPS: PKR 0.73) during the corresponding period last year – a growth of 3.3x YoY.

According to AKD Securities, while YoY volumes are expected to remain flat at local sales of ~626k tons and exports of ~345k tons, growth will primarily emanate from i) increased cement price with average local price at PKR 381 per bag and export price at US$61 per ton, ii) subdued coal prices with average 1QFY13 coal price at US$87 per ton and average freight at US$16 per ton and iii) higher ‘other income’ at PKR 459.3 million in 1QFY13 compared to PKR 261.4 million in 1QFY12. Sequentially, gross margin is expected to improve to 33.8% compared to 31.9% in 4QFY12. Easing interest rate environment will also help profitability where financial charges are expected to stand at PKR 422.7 million in 1QFY13 compared to PKR 448.9 million in 1QFY12. Lower turnover tax at 0.5% should also help profitability growth where AKD Securities expects tax to stand at just PKR 79.9 million. Note that variance in tax could potentially result in a deviation on either side in the result. Going forward, AKD Securities believes cement prices are likely to remain firm at current levels although coal prices remain a question mark. AKD Securities’ current full year estimates incorporate coal at US$95 per ton (FOB), however, should coat prices continue trading at current levels, AKD Securities’ estimates may come for some upward revision. At current levels, AKD Securities has an `Accumulate’ stance on DGKC with a target price of PKR 56/share.

INDU: 1QFY13 Result Preview
Indus Motor Company (INDU) is scheduled to finalize its 1QFYI3 financial result today where AKD Securities expects the company to post NPAT of PKR 737 million (EPS: PKR 9.37) in 1QFY13 vs. NPAT of PKR 937 million (EPS: PKR 11.93) in 1QFY12, translating into a decline of 21%YoY. In this regard, INDU’s 1QFY13 sales came in at 8,299 units vs. 12,820 units sold in the same period last year – this 35%YoY decline in sales volume came about due to phase-out of the Cuore variant and a 34%YoY decline in Corolla offtake to 7,032 units in the period under review. 1QFY13 sales of Corolla are the lowest in the last 7 quarters. White product prices have remained firm on a sequential basis, AKD Securities expects GMs in 1QFY13 to slip by 150bps to 8.49% on the back of increased costs, with the PKR depreciating against the JPY by 4.5%. While AKD Securities is in the process of reviewing AKD Securities’ financial model for INDU AKD Securities believes listed Pakistan Autos face a benign outlook for both raw material prices (steel) as well as the PKR /JPY exchange rate (Japan exports have shown weakness due to the ongoing dispute with China while further stimulus measures by BoJ could be on the cards). As such, GoP policy on auto imports remains the critical swing factor where the Ministry of Industries appears to be pushing for a more balanced policy.