{"id":328819,"date":"2024-08-07T11:10:31","date_gmt":"2024-08-07T03:10:31","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=328819"},"modified":"2024-08-07T11:10:34","modified_gmt":"2024-08-07T03:10:34","slug":"stock-in-focus-dmci-holdings-inc-dmc-7-aug-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-dmci-holdings-inc-dmc-7-aug-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: DMCI Holdings Inc. (DMC) – 7 Aug 2024 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>DMC<\/td><\/tr>
Company Name<\/strong><\/td>DMCI Holdings Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>7 Aug 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 11.86<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We recognize that DMC, as Chairman Sid Consunji puts it, has reached its new normal against the high base it established in the past two years. Moving forward, we should see better performance from its strategic investment in Maynilad, as well as from its non-SCC units. However, despite our slightly rosier outlook on DMC compared to previous quarters, we maintain our HOLD rating on the stock as the potential upside to consensus Target Price of P11.86 per share remains very limited at this point.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

DMC earnings drop 30%, in-line with expectations<\/h3>\n\n\n\n

DMC reported a core net income of P10.9 Billion for the 1st half (1H) of 2024, or 51.9% of 2024 forecasts. Earnings from coal mining was as weak as expected, considering the normalization of global coal prices, while weaker than expected earnings from SCC\u2019s power generation segment was offset by the outperformance of the water distribution utility and construction segments.<\/p>\n\n\n\n

SCC underperforms<\/h3>\n\n\n\n

Coal revenues drop 32% year-on-year (YoY) despite a 2% uptick in sales volume, as coal prices continue to normalize. In addition, most of the sales volume came from SCC\u2019s own power plants. SCC\u2019s powergen segment, on the other hand, underperformed on lower SCPC availability (71% from 84% in 2Q 2023). Spot market ASP were also lower YoY, as the government implemented price caps to limit the surge in WESM prices amidst record high temperatures. Overall, SCC\u2019s earnings for the quarter slumped by 41% to P3.4 Billion after eliminations.<\/p>\n\n\n\n

DMCI Homes net income drop 41%<\/h3>\n\n\n\n

The drop in earnings was in line with the 44% decrease in revenues from P5.7 Billion in 2Q 2023 to P3.2-Billion this quarter. This resulted from lower recognition of ongoing projects, fewer new projects qualifying for revenue recognition, and increased reversals because of sales cancellations. According to the company, the implementation of extended down payment schemes resulted in fewer new projects qualifying for revenue recognition. DMCI Homes also saw a 40% YoY jump in sales cancellations to P1.2 Billion, further contributing to the revenue slowdown. DMC\u2019s property development unit saw 2Q 2024 earnings drop by 41% to P737 Million from P1.3 Billion in the same period last year.<\/p>\n\n\n\n

DMCI Power contribution surge 54% to record high<\/h3>\n\n\n\n

Double-digit increases in power dispatch and lower direct costs fueled the jump in earnings from DMC\u2019s off-grid powergen business. Total energy sales volume rose
by 10% YoY to 138.8 GWh on the back of high demand and the execution of emergency PSAs in Palawan, Masbate, and Oriental Mindoro. Cash costs, on the hand, decreased by 5% on lower fuel costs and lower tariffs.<\/p>\n\n\n\n

Construction unit reports 73% jump in earnings despite project delays<\/h3>\n\n\n\n

Revenues of DMC\u2019s construction segment under D. M. Consunji, Inc. declined by 14% to P3.6 Billion due to project delays and fewer ongoing projects. Contributions
from infra projects fell to 54% to 9% following the completion of key projects. However, a 14% drop in cash costs and 18% decline in non-cash costs provided a buffer and resulted in a 2% jump in net income margins. Overall, the construction unit reported a 73% jump in 2Q 2024 net earnings to P240 Million.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>