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Morning Call about Result Previews – Arif Habib Limited

Karachi: DGKC and KAPCO for 1QFY12

DGKC; Recovery in price and volume may lead to 5x earnings growth

According to Arif Habib Limited, D.G. Khan Cement Company Limited (DGKC) is scheduled to announce its 1QFY12 result on October 22, 2011. Arif Habib expects the company to post profit after tax (PAT) of PKR 122mn (EPS: PKR 0.33) in 1QFY12, a massive 5x YoY growth, when compared with PAT of PKR 22mn (EPS: PKR 0.06) in the corresponding quarter last year.

This is mainly on account of an expected 10% YoY improvement in the volumetric sales coupled with 30% YoY increase in the average retention prices. The profitability of the company suffered from a 27% YoY decline in the volumes due to the floods last year. DGKC is expected to book dividend of PKR 3/share from MCB Bank, which is expected to improve other income by 4% YoY.


Financial Highlights
PKR mn 1QFY12 1QFY11 YoY
Net Sales 5,111 3,528 45%
Cost of Sales 3,959   2,849 39%
Gross Profit 1,152   678  70%
Admin Expenses  53 42  26%
Selling Expenses 618 327 89%
Other Income 243 233  4%
Finance Cost 513 488  5%
Profit after tax  122 22 450%
EPS (PKR) 0.33 0.06
Source: Company financials and AHL estimates


KAPCO is expected to earn PKR 1.70/share in 1QFY12

Kot Addu Power Company Limited (KAPCO) is scheduled to announce its 1QFY12 financial results on October 24, 2011. Arif Habib expects KAPCO to earn profit after tax (PAT) of PKR 1,498mn (EPS: PKR 1.70) compared to PKR 2,037mn (EPS: PKR 2.31) in the corresponding period last year, projecting a 26% YoY decline.

This is likely to be on account of higher maintenance cost. Higher other income earned through penal interest charge on receivables from WAPDA, will support the bottom line of the company. The company is expected to have maintained an average complex availability of over 81% while load factor for the period is expected to have averaged at 47% during 1QFY12.

Arif Habib Limited’s Dividend Discount Model (DDM) based target price for Jun 2012 works out to be PKR 58.7/share, which offers an upside potential of 35% from its last closing price of PKR 43.6/share. Besides upside, the scrip offers FY12E dividend yield of 16.2%.


Financial Highlights (PKR mn) 1QFY12  1QFY11   YoY
Net Sales 25,719  16,201 59%
Operating costs 23,194  12,894  80%
Gross Profit 2,525  3,307   -24%
General and Admin Expenses 154  140  10%
EBIT  2,371   3,167 -25%
Financing Cost 2,652 2,015 32%
Other Income  2,563 1,939  32%
EBT 2,282   3,091  -26%
Taxation  784 1,054  -26%
Net Profit  1,498 2,037 -26%
EPS 1.70 2.31 -26%
Source: AHL Research

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