Buy DCB Bank; target of Rs 160: Motilal Oswal

Motilal Oswal's research report on DCB Bank

DCB Bank (DCBB) reported 22.6% YoY growth in PAT to INR1.55b (15% beat) due to higher other income. NII grew 7% YoY to INR5.1b (in line, up 2.5% QoQ). NIM moderated 12bp QoQ to 3.27%, adversely affected by extension of some of the one-offs that occurred in 1QFY25 (including replacement of penal interest with penal charges). Advances grew 19.3% YoY/5.4% QoQ, supported by healthy growth in gold loans, agri banking, and mortgages. Deposits rose 20% YoY/5.5% QoQ, led by growth in CASA deposits. CASA mix, thus increased 20bp QoQ to 25.6%. Fresh slippages inched up to INR3.89b (vs. INR3.73b in 1QFY25). GNPA/ NNPA ratios moderated 4bp/1bp QoQ to 3.29%/1.17% in 2QFY25. PCR stood stable at 65.2%. We fine-tune our earnings and estimate FY26 RoA/RoE at 0.96%/13.7%. Reiterate BUY with a TP of INR160 (based on 0.9x FY26E ABV).

Outlook

while asset quality ratios witnessed marginal improvement. The restructured book was under control at 2.1% of loans. We fine-tune our earnings and estimate FY26 RoA/RoE at 0.96%/13.7%. Reiterate BUY with a TP of INR160 (based on 0.9x FY26E ABV).