Buy Dena Bank; target of Rs 127: SPA Research

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26 Aug, 2025 12:21

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SPA Research is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 127 in its February 7, 2013 research report.
 
“Dena Bank came out with steady set of numbers which were in-line with our estimates. While the NII grew 13.6% YoY to INR 6149 mn, net profit surged by 10.6% to INR 2396 mn restricted by mere 7.8% increase in non-interest income coupled with 26.0% increase in provisioning expenses (due to additional provision of INR 292 mn @ 0.75% on standard restructured assets as mandated by RBI). NIMs improved by 2 bps sequentially to 2.9% aided by sharper rise of 16 bps in YoA. Asset quality worsened marginally with 12 bps increase in GNPA. The bank restructured INR 2.6 bn of loans in the last quarter and total slippages amounted to INR 2.4 bn. We retain our BUY rating on the stock with a target of INR 127.”
 
“DNBK's total business registered a robust growth of 27.2% to INR 1479 bn on the back of 24.2% growth in deposits & 31.5% surge in loan book. Advances growth was led by 35.5% surge in priority sector lending. Its strategy of giving incremental loans above INR 100 mn to only BBB and above rated entities for the last couple of quarters has enabled DNBK to maintain tight control over its asset quality. Traction in agriculture segment is likely to remain strong given its obligation to meet PSL targets. Additionally high yielding SME and Retail will continue to remain primary drivers of growth. NIM remained almost flat improving sequentially by 2 bps to 2.9% in Q3FY13, on the back of 16 bps improvement in yield on advances as against 11 bps surge in cost of deposits. We expect NIMs to remain strong at +3% levels due to its excellent liability profile (due to its dependence on low cost deposits such as CASA, CP & retail term deposits instead of bulk deposits) and increasing focus on high yielding segments like MSME and Retail.”
 
“DNBK with healthy operational parameters, strong deposit mix, stable asset quality, strong return ratios and earnings visibility, is well positioned to capture the uptick. We expect asset quality concerns to recede for the entire banking industry with the expected macro economic recovery in the next financial year. Improving core operating metrics with the strengthening of balance sheet and lower operating costs will drive the growth going forward. Further higher exposure of 23.3% in AFS book will aid profitability in a declining interest rate scenario. We retain our BUY rating and target of INR 127 on the stock, which implies 0.9x FY14E P/ABV,” says SPA Research report.

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