DCB Bank Ltd CMP: Rs 57 Target Price: Rs 76 Recommendation: BUY Continues to demonstrate strong performance DCB Bank Ltd (DCB) reported results above expectations driven by stable margins and improvement in asset quality. PAT increased 35.1% on YoY basis and stood at Rs 36.4 cr. NIMs stood at 3.55%; down by 13 bps QoQ which was broadly on expected lines as there was low cost borrowings raised by the bank in the last quarter. Growth was driven by agri and corporate book while SME/MSME book continued to witness run down. Though deposits increased 26.9% YoY; CASA deposits continue to decline with CASA ratio now at 24.8% (26.9% in Q2FY14 and 28.9% in Q3FY13). Gross NPA improved sequentially; of which large portion came from write offs. Corporate book is still holding up well; whereas the SME/MSME book witnessed some increase in stress. DCB has emerged as a successful player in a tough environment by focus on consolidation and steady improvement in most of the parameters. With higher growth, stable margins, improving productivity, improving asset quality and adequate capitalization, the bank is all set to enter in new phase of growth path. We expect DCB to report 29.8% CAGR in PAT over FY13-FY15E leading to RoE of 14.1% and RoA of 1.3% for FY15E. We have seen a significant re-rating in the stock in the last one quarter driven by consistently improving performance which we believe is sustainable. At CMP, the stock is trading at 1.28x and 1.13x FY14E and FY15E Adj BVPS and 9.48x and 8.29x FY14E and FY15E EPS respectively. We maintain our BUY rating with a revised target price of Rs 76 (1.5x FY15E ABV) indicating an upside of 33% from current levels.
Posted on: Mon, 20 Jan 2014 08:28:07 +0000
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