Buy Dena Bank; target of Rs 104: Magnum

Magnum is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 104 in its May 12, 2012 research report.

“Bank reported more than 62% year-on-year jump in its fourth quarter (Jan-March) net profit to Rs 255 crore, driven by one time tax refund. For the fiscal year 2011-12, net profit increased by 31% y-o-y to Rs 803 crore. Net interest income increased nearly 27% to Rs 598 crore. Dena Bank’s loan book grew at 25.5% YoY and 18.3% on QoQ basis. Out of the total advances portfolio,
MSME witnessed 22.22% YoY growth whereas Retail grew by 18.68% on YoY basis. However Management expects to sustain loan growth of 20%-22% going forward.”
"During the quarter, gross Non-Performing Asset ratio declined to 1.67% compared with 1.88% and net NPA ratio too dropped at 1.01% versus 1.10%. Most of the restructured loans were from sectors like State Electricity Boards, Aviation, Cement, and Textile. The bank reported lower slippages at 1.6% for FY12 compared to 2.1% for FY11 reflecting strong improvement in asset quality. According to Management, most of large-ticket accounts that were in pipeline have been accounted for in restructuring. NIMs stood at 3.21% in Q4FY12, as compared to 3.33% in Q3FY12 and 3.09% in Q4FY11. Going forward, Management has given the guidance of maintaining NIMs at 3% for FY13E. The bank’s total deposits grew by 20.18% YoY and 12.9% QoQ in Q4FY12. CASA deposits grew at 16.91% YoY and 11.5% on QoQ basis to Rs 26,590 crs. CASA as a % of total deposits stood at 34.46% in Q4FY12.” 
“Dena Bank is currently trading at a striking valuation amongst the Banking space. At CMP of Rs 85, it is trading at a PE of 3.17x of FY13E EPS and at an adjusted P/BV of 0.65x FY13E BV of Rs 131. We have valued the Bank at P/BV of 0.8x FY13E & maintain our BUY rating on the stock with a target price of Rs 104,” says Magnum research report. Non-Institutions holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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