Topline Securities hosted a Corporate Briefing Session (CBS) for DG Khan Cement (DGKC), where senior management discussed the company’s recent financial performance and future outlook. According to the management, local cement demand will remain flat in FY24. However, cement demand to recover by 5-10% in FY25. At present, the demand for cement is driven by private-sector construction activities.

• DGKC raised cement prices by 14-15% to pass on the impact of axle load. Management highlighted that any further impact of axle load will be passed on to consumers.
• MRP in the North is Rs1,260/bag and Rs1,100/bag in the South. The current retention price is around Rs16,000/ton after incorporating a recent hike due to axle load.
• Inland freight from Karachi to Kallar Kahar has increased from Rs8,500/ton to Rs12,000/ton due to the implementation of axle load.
• DGKC cannot export to South Africa due to over 80% anti-dumping duty. However, as per management, LUCK has the lowest anti-dumping duty, which is less than 30%.
• The export price of clinker is in the range of US$30-31/ton, and the cement export price is around US$45/ton. The company is only yielding contribution margins on clinker export.
• DGKC recently exported two shipments to Mexico and four shipments to the USA.
• As per the management, price discipline is to remain in place after the commencement of the Fauji Cement Company Limited (FCCL) plant at DG Khan. However, a premium of Rs10/bag was reduced after the commencement of the FCCL plant at DG Khan.
• DGKC has a coal inventory of just one week. Afghan coal cost is in the range of Rs50-52k/ton.
• The coal mix in the South is 80% imported; the rest is a mixture of local/Afghan/Iran. Whereas in the North, the coal mix is 30% imported, and the rest is a mix of local and Afghan.
• The average cost of coal in 1QFY24 was around Rs45k/ton, while the current cost is approximately Rs47k/ton.
• The power mix is 30% grid and 70% own power generation. The grid rate is around Rs41/kWh (exclusive of tax).
• In commenting on the expansion plan, management expects a capacity expansion in around two years as the demand will improve by then, and debt levels will be reduced.