Buy DCB Bank; target of Rs 216: HDFC Securities

HDFC Securities' research report on DCB Bank

We  believe  DCBB  is  beginning  to  reap  the  rewards  of investments in distribution  (opened 118 branches over 2 years) and widening the basket of products  offered  at  each  branch.  With  a calibrated expansion approach hereon,  the  mgt  is  focussed  on  scaling up efficiency and benefit from oplev.  While  DCBB’s  well  capitalized  B/S  (~15.6%)  will support rapid growth,  its  fix  on  asset quality and increasing oplev will boost return ratios (7bps over FY18-20E). Our aggressive cost assumptions (20% CAGR over FY18-20)  caps  earnings  growth.

Outlook

Maintain BUY with a TP of Rs 216 (2.2x Mar-20 ABV of Rs 98).

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