Prabhudas Lilladher's research report on DCB Bank
We do not materially change estimates, but with asset quality risks receding, provisions for FY24/25E could be lower (PLe at ~68bps) leading to earnings upgrades. DCB Bank (DCB) earnings were in-line with PAT at Rs1.14bn, although asset quality was better than expected. NII was a slight beat by 1.9%, due to tad better loan growth and NIM. Strong credit flow is sustaining, as disbursals in Q3 at Rs46bn were similar to Q2 levels. Bank retained its guidance to double balance sheet over 3-4 years and hence we build a loan CAGR of 19% over FY23-25E. Asset quality improved with GNPA at 3.63% (PLe 3.89%, reduction of 27bps QoQ), driven by lower gross slippages. Slippage run-rate is expected to fall over next 2 quarters.
DCB is targeting a RoA/RoE of 1.0%/14% which would be achieved by FY25E. We maintain ‘BUY’ rating and multiple at 1.0x Sep’24 ABV, keeping TP unchanged at Rs150.
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