Buy Dena Bank in Rs 87-91 range; target Rs 110: ICICIdirect

ICICIdirect.com is bullish on Dena Bank and has recommended buy rating on the stock with a target price of Rs 110 in its April 2, 2012 research report.

Technical Outlook
The share price of Dena Bank saw a good run-up on the bourses, appreciating almost 110% from its 52-week low of Rs 47.55 in early January 2012 to the mid February 2012 high of Rs 100 An important observation on the long term price chart is that the said bounce occurred precisely after retracing the entire 2008-2010 rally (from Rs 24 .25 to Rs 151) by 80% highlighting the overall positive structure. ] After the astounding rally in less than a couple of months, the stock witnessed a healthy correction, which retraced the January-February rally by 38.2%. Despite the recent volatility in the broader markets, the stock remained undeterred as it continued to consolidate in a narrow range. This sideways consolidation appears to have taken shape of a Pennant formation, which is a continuation pattern in technical parlance consisting of converging trend lines resembling a symmetrical triangle. It marks a brief consolidation as bulls take a breather before continuing in the direction of the prevailing trend. We expect prices to eventually break-out past the said consolidation range and continue the northward journey. Therefore, this offers a good investment opportunity from a medium-term perspective. We recommend accumulating the stock in the range of Rs 91 to 87 for a target of Rs 110 with a protective stoploss in place at Rs 81.80. Fundamental Outlook
Dena Bank is based in the CASA rich western part of India with majority of its branches in Maharashtra and Gujarat. CASA ratio of 35% supported healthy NIM of 3.2% in Q3FY12. The current pace of credit growth is expected to be maintained with 19.6% CAGR to Rs 64073 crore, over FY11- 13E. In terms of asset quality, its exposure towards aviation, telecom, textile and steel is limited. Although it has high SEB exposure, majority is towards Gujarat SEB, which is a profitable entity. The stressed SEB exposure may be restructured with 2% provisioning requirement having minimal impact on PAT. We expect PAT growth of 22.1% CAGR to Rs 912.5 crore over FY11-13E. It has posted excellent return ratios with RoA of 1% and RoE of 20% in the past 14 quarters. In spite of healthy asset portfolio and strong return ratios, we have valued Dena at 0.9x FY13E ABV and target price of Rs 104, says ICICIdirect.com Research report. FIIs holding more than 30% 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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