Prabhudas Lilladher's research report on DCB Bank
DCBB a mixed quarter; while core PPoP was a 14% beat due to higher fees, asset quality saw a blip due to higher slippages resulting in GNPA rising by 10bps QoQ (vs decline for peers). Loan growth was bit better and bank would like to increase its risk appetite. Hence focus is back on bolstering LAP. While CoF could increase in H2FY24 albeit at a slower pace vs H1FY24, incremental focus on LAP, MFI and SME could partly support NIMs. Gross slippages emanated from OTR pool that has entirely come out of moratorium; bank expects recoveries to enhance in H2FY24. While valuation is attractive at 0.75x/0.65x key levers for re-rating are (1) consistent decline opex/assets led by sustained credit momentum (2) higher recoveries resulting in lower GNPA and (3) increase in RTD share.
Outlook
We maintain multiple at 1.0x but increase TP to Rs160 from Rs150 as we roll forward to Sep’25 ABV. Retain ‘BUY’.
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