Buy DCB Bank; target of Rs 132: Kotak Securities

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26 Aug, 2025 12:21

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Kotak Securities' report on DCB Bank

"Stable margin aided in healthy core performance - NII grew 29.7% YoY; net income was also in-line with our expectation on back of strong trading gains and containment of opex. Although NIM has remained stable QoQ, management has guided about the pressure on its asset yield due to increase in competitive intensity as well as investment required in the low yielding RIDF bonds. CASA mix is trending lower (in line with the expectations) as overall deposits have to grow faster than the CASA to fund its B/S growth."

"Asset quality has remained stable with healthy provision coverage ratio. Outstanding restructured book is relatively comfortable at Rs.1.1 bn (1.2% of net advances) with lower stressed portfolio (net NPA + restructured book) at 2.2% of net advances. We believe DCB bank continues to be a potential re-rating candidate with opex improvement on track, healthy asset quality, stabilizing credit costs and comfortable core capital (tier-I: 13.6%). As stock trades at reasonable valuation (1.8x FY17E ABV), we retain BUY rating on the stock with upward revised TP of Rs.132 (2.0x FY17E ABV; Rs.103 earlier) by rolling over to FY17 estimates", says Kotak Securities research report.

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