Accumulate DCB Bank; target of Rs 232: Arihant Capital
Arihant Capital’s research report on DCB Bank
DCB bank delivered strong numbers during the quarter with 50% jump in net profit of Rs 96 cr (in-line with our estimate), driven by moderating operating expenses and lower provisioning. PPoP grew by 31% to Rs 185 cr, due to high other income and controlled OPEX. Loan growth of the bank lowered in FY19 due to de-growth in corporate book. Loan book for the year FY19 grew by 16% YoY to Rs 23,568 cr. NII for the quarter grew by 14% YoY to Rs 301 cr (our estimate: Rs 295 cr). OPEX grew by 4% YoY while it was flat on QoQ basis to Rs 215 cr, due to slower branch addition and improving productivity leading to improvement in Cost to Income ratio. CI ratio declined by 151 bps QoQ to 53.71% (multi quarter low).
We have valued the stock at 1.9x to its FY21E ABV and arrived at a fair value of Rs 232 per share, giving a potential upside of 15%. We have an “ACCUMULATE” rating on the stock.
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