DG Khan Cement Surpasses Earnings Expectations Amid Improved Margins

Karachi: DG Khan Cement Co. (DGKC) has reported a notable increase in its quarterly and annual earnings for the fiscal year 2025, surpassing market expectations. The company announced earnings of approximately Rs 3.16 billion for the fourth quarter, equating to an earnings per share (EPS) of Rs 7.21, marking a substantial 58% rise compared to the previous quarter.

The annual financial performance of DGKC also showed a significant improvement, with earnings increasing 16-fold year-over-year to Rs 8.7 billion, translating into an EPS of Rs 19.80. This impressive growth was attributed to higher-than-anticipated gross margins and a lower effective tax rate.

Despite the strong earnings, DGKC declared a final cash dividend of Rs 2 per share for the fourth quarter, which fell short of industry expectations. The company’s gross margins for the fourth quarter stood at 31.8%, up from 26.0% in the previous quarter and 8.0% in the same period last year. For the full fiscal year, gross margins were 25.7% compared to 15.9% in the prior year.

The improvement in gross margins was supported by better domestic retention prices and an efficient fuel mix, with alternative fuels accounting for up to 20% of usage at the Hub Plant. Additionally, the effective tax rate decreased significantly, standing at 25.7% in the fourth quarter compared to 44% in the third quarter. For the full fiscal year, the effective tax rate was 33.3%, down from 81% in the previous year.

The company also managed to reduce its finance cost by 70% year-over-year and 14% quarter-over-quarter to Rs 570 million, owing to lower borrowings and interest rates. However, the fiscal year 2025 finance cost increased by 52% to Rs 3.87 billion.

Net revenue for the year increased by 9% year-over-year, driven by improved retention prices and higher export dispatches. However, domestic dispatches in the fourth quarter decreased by 5% year-over-year and 11% quarter-over-quarter to 0.80 million tons, while export dispatches rose by 5% year-over-year and 6% quarter-over-quarter to 0.48 million tons.

Market analysts maintain a “BUY” recommendation for DGKC, with the company trading at a projected FY26E/FY27F price-to-earnings ratio of 7.8/6.7x and a forecasted dividend yield of 3.8% for FY26.