Buy Dena Bank; target of Rs 129: Nirmal Bang

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Buy Dena Bank; target of Rs 129: Nirmal Bang

Nirmal Bang is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 129 in its August 1, 2011 research report.

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Nirmal Bang is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 129 in its August 1, 2011 research report.

"Dena bank is a Government owned bank with its head office located in Mumbai. The bank has a network of 1297 branches, 507 ATMs and 12 extension counters as on 30th June 2011 with a total business of Rs.103,973 crs. The bank is mainly concentrated in the Gujarat state (approximately 41% of total branches) and has a major presence in rural area. Out of its total branches, ~56% are in rural and semi-urban areas."

"Dena Bank's loan portfolio has historically been inclined towards corporate lending which contributed above 50% of the total advances. However, the bank has now shifted its focus more on SME & Retail segment to exploit the potential in these high yielding segments. The bank is targeting a 25% growth in its retail portfolio for FY12E. Dena Bank's strength lies in having strong concentration of branches in the CASA rich western regions of the country. On account of having a strong branch network, Dena Bank has been able to register one of the highest CASA ratios among the PSU banks. Management continues to focus on CASA share by increasing the client base by 20% in FY12E. With increasing interest rates and cost of deposits, NIMs is expected to remain under pressure. However, Management in confident that the bank will be able to maintain NIMs to around 3% for 12E. We have factored in a 20 bps decline in NIMs. Going forward, we expect NII to grow at CAGR of ~16.4% for FY11-FY13E resulting from higher CASA deposits, focus on retail and SME portfolio and availability of adequate capital."

"At CMP of Rs 85, the stock is trading at 0.8x of its FY12E ABV and 0.68x its FY13E ABV whereas on PE it is trading at 4.19x and 3.49x in FY12E and FY13E respectively. Looking at the historical trend we value it at 1.2x P/ABV of FY12E. Based on our estimated book value of Rs.108 per share for FY 2012E and P/ABV target multiple of 1.2x we arrive at a target price of Rs.129. We recommend BUY on the stock with target price of Rs 129 indicating a potential upside of 50%," says Nirmal Bang research report.  

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment