Buy DCB Bank; target of Rs 210: Motilal Oswal

Motilal Oswal's research report on DCB Bank

DCB Bank (DCBB) has been delivering healthy loan growth and has guided for a steady growth rate of 18-20% over the coming years. The bank continues to focus on granular retail loans with a retail mix (ex-Agri) at 65% of the total portfolio. NIMs improved 3bp QoQ to 3.23% in 2QFY26, aided by a reduction in deposit costs. NIMs are expected to improve gradually, supported by lower funding costs and limited yield compression, though further rate cuts remain a factor to watch out for. With healthy business growth, operating leverage and margin improvement, we expect DCBB to report steady traction in the balance sheet and earnings growth.

Outlook

The valuations remain attractive at 0.8x FY27E ABV for a potential RoA of ~1% and ~24% earnings CAGR estimated over FY26-28E. We reiterate our BUY rating with a revised TP of INR210 (premised on 1.0x FY27E ABV).