ICICI Direct is bullish on DCB Bank has recommended buy rating on the stock with a target price of Rs 250 in its research report dated July 17, 2019.
ICICI Direct's research report on DCB Bank
Credit growth came in at a 30 quarter low of 13.2% YoY to Rs 24044 crore, lower on the back of de-growth in the corporate book and slower growth in SME & mortgage book. However, ex-corporate, loan growth remains healthy at 19% YoY. Deposit accretion has been slower, led by slower CASA growth & term deposit, which grew ~15% YoY. CASA ratio was broadly stable at ~24.5% for Q1FY20. NII came in well below our estimates at ~Rs 305 crore, up ~12% YoY, on the back of lower credit growth & dip in margin due to higher cost for long term refinance.
DCB Bank has maintained its long term growth path. Focus on risk adjusted growth, steady margins and improvement in CI ratio are expected to lead to an improvement in earnings at 23.5% CAGR, return ratio of ~1.1% and RoE of ~15% by FY21E. Therefore, we reiterate our positive stance and maintain our target price of Rs 250 valuing at 2.2x FY21E ABV. Recommend BUY.
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