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Last Updated : Apr 24, 2019 03:17 PM IST | Source: Moneycontrol.com

Buy DCB Bank; target of Rs 247: Cholamandalam Securities

Cholamandalam Securities is bullish on DCB Bank has recommended buy rating on the stock with a target price of Rs 247 in its research report dated April 23, 2019.

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Cholamandalam Securities' research report on DCB Bank


DCB’s advances grew by a healthy 15.9% YoY (3% QoQ) to INR 236bn in 4QFY19. The growth came predominantly from Mortgages (15.9% YoY) which constitute of 40% of the total loan book, Agricultural segment (28.8% YoY) constituting 20% of the advances and SME & MSME which grew 15.9% YoY (12% of loan book). The bank is moving toward short-tenor, lower capital consuming corporate loans, which coupled with higher repayments in 4QFY19, led to the decline in corporate book by 11.4%. Strong growth was also seen in Deposits (18.4% YoY, 3.4% QoQ), which stood at INR 284bn. CASA deposits grew by 16.6% YoY albeit slower than the 19% YoY growth seen in time deposits. As a result, CASA ratio dipped by 38bps YoY to 23.95%. The management targets to double the balance sheet over the next 3-3.5 years.


Outlook


We believe that healthy loan book growth, branch expansion and well-maintained asset quality paint a positive picture for the bank going forward. In addition, improvements in C/I due to concentrated effort from management to improve its efficiency and focus on small ticket loans are expected to result in strong RoE expansion. DCB trades at 1.5X FY21E P/ABV and 9.4X FY21E EPS. We rate the stock a BUY with a target price of INR 247, assigning a FY21E P/ABV of 1.8X.


For all recommendations report, click here


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.

First Published on Apr 24, 2019 03:17 pm
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