Jul 20, 2013 02:57 PM IST | Source:

Buy Development Credit Bank; target Rs 75: Nirmal Bang

Nirmal Bang is bullish on Development Credit Bank (DCB) and has recommended buy rating on the stock with a price target of Rs 75, in its research report dated July 18, 2013.

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Nirmal Bang research report on Development Credit Bank (DCB)

"Development Credit Bank (DCB) reported results in line with expectations driven by strong growth in NII, higher treasury income and higher profitability. PAT more than doubled on YoY basis and stood at Rs 42.8 cr. However, Net Profit, excluding onetime treasury gains (Rs 8.5 cr) and onetime operating cost (Rs 1 cr penalty paid for violation of KYC norms) stood at Rs. 35 cr reflecting a growth of nearly 85 percent YoY. NIMs improved YoY driven by lower cost of funds and stood at 3.44 percent in Q1FY14. DCB has emerged as a successful player in a tough environment by focus on consolidation and steady improvement in most of the parameters. The bank is adequately capitalized and in our view it has all the ingredients in place to lead the growth path. We expect DCB to report 27.4 percent CAGR in PAT over FY13-FY15E leading to RoE of 13.6 percent and RoA of 1.2 percent for FY15E.  At CMP, the stock is trading at 1.14x and 0.99x FY14E and FY15E Adj BVPS and 8.8x and 7.4x FY14E and FY15E EPS respectively which we believe is attractive. We roll-over our target multiple from FY14E to FY15E to a target price of Rs 75 (1.5x FY15E ABV) with an upside of 50 percent from a long term perspective and maintain our 'BUY' rating," says Nirmal Bang research report.

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