ICICI Direct is bullish on DCB Bank has recommended buy rating on the stock with a target price of Rs 210 in its research report dated January 17, 2019.
ICICI Direct's research report on DCB Bank
DCB Bank reported an NII of Rs 293.6 crore, up 17% YoY, on the back of steady margins at 3.83% and robust credit growth of 23% YoY Other income for the quarter came in higher at Rs 94.5 crore vs. Rs 74.9 crore in Q3FY18 led fees from PSL certificate Led by higher other income & healthy NII, operating profit came in at ~Rs 174 crore, up 19% YoY. This led to a decline in cost-to-income ratio to 55.2%, a sharp fall of ~380 bps QoQ. PAT growth remained strong at 51% YoY to Rs 86.1 crore, a tad above our estimate Slippages for the quarter remained elevated, compared to the previous run rate, at Rs 114.3 crore. Accordingly, a slight deterioration in asset quality was witnessed with GNPA ratio at 1.92% vs. 1.84% in Q2FY19. The bank reported a fraud of Rs 12.44 crore (classified in agri book) and has provided for the exposure. Unamortised balance is at Rs 2.87 crore There was robust advances growth of 23% YoY to Rs 22888 crore, led by agriculture & non mortgage retail book. Deposits increased 29% YoY with the CASA ratio stable at ~24%.
Hence, we revise our target price upwards to Rs 210 per share, valuing the stock at ~2x FY20E. Subsequently, we upgrade our rating from HOLD to BUY.
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