Nirmal Bang is bullish on Development Credit Bank (DCB) and has recommended buy rating on the stock with a target of Rs 64 in its April 16, 2013 research report.
“Development Credit Bank (DCB) reported good results yet again beating our and street expectations driven by strong growth in NII, improved cost to income ratio and higher profitability. PAT almost doubled on YoY basis and increased 26.9 percent QoQ to Rs 34.1 cr in Q4FY13. For FY13, NIMs stood at 3.35 percent led by higher yield on advances and control over cost of funds. PAT increased 85.4 percent YoY to Rs 102.1 cr for FY13.”
“We have seen DCB emerging strong through tough times with focus on secured credit which has led to an overall improvement in advance book and the liability profile of the bank. The bank has shown steady progress in most of the performance parameters be it sustainable NIMs, focus on increasing share of fee income, cost efficiency and controlled credit cost. We believe that the bank will embark on expansion plans over the next 2-3 years and gear itself for next innings. We expect the bank to report 22.3 percent CAGR in PAT over FY13-FY15E leading to RoE of 12.7 percent and RoA of 1.1 percent for FY15E.”
“At CMP, the stock is trading at 1.01x and 0.89x FY14E and FY15E Adj BVPS and 8.4x and 7.07x FY14E and FY15E EPS respectively which we believe is attractive and therefore we continue to maintain our BUY rating on the stock. Our target price for the stock is Rs 64 based on P/ABV multiple of 1.45x on its FY14E adjusted book value of Rs.43.7 per share,” says Nirmal Bang research report.
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