There are just four profitable cement companies in KSE, namely:
1) Lucky Cement
2) Attock Cement
3) Dera Ghazi Khan Cement (DGKC)
4) Fauji Cement
Today, I am briefly discussing DGKC. It has posted its result for 1H 2010 and earned PKR 192 million (EPS: 0.52) which is 59% lower than last year earnings of PKR 470 million (EPS: 1.29). The results are below expectations and its share is now showing a declining trend as you can see in graph.
However, we need to keep in mind that increase in fuel cost, winter season and floods have deteriorated the earnings of cement sector. As we all know coal prices are now getting stable, we are now at the end of winter season, and reconstruction activities in flood affected area have started. All of these things showing a positive and improved performance in 2H 2010, therefore I would advice all my readers to accumulate position in DGKC.
Company has also announced 20% right shares at PKR 20. Most of the analyst are not that bearish about this stock in the long term and current bearish trend is just an opportunity to grab this stock at lower levels. However, the stock might go even further down so investor should accumulate the position gradually. Research houses are giving a target price of around 32-46 so minimum return of 25% is possible from current level of PKR 24.