Buy DCB Bank; target of Rs 140: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on DCB Bank

Robust pre-provisioning profit growth, up 35.6% yoy (-0.5% qoq), led by healthy NII (29.6%yoy, 6.4% qoq), strong fee-income (20% yoy, 9.4% qoq) and lower cost-incomeof 61.4% (down 107bps yoy)

SME NPAs of Rs443m were sold to an asset reconstruction company, due to which net slippages were a low Rs69m (0.3% of loans, annualized). Hence, gross NPAs fell 11bps qoq to 1.8% of advances, one of the lowest among peers

The bank is well capitalized with capital adequacy of 15% (tier-1 capital of 14.2%), which is more than sufficient to meet Basel-3 norms and business growth over FY15-17e

We maintain our Buy rating on the stock, as we expect the stock to quote at higher-thanpast valuations led by better-than-past business growth, stable asset quality and greater capital adequacy ahead. At our target of Rs140, the stock would trade at a PABV of 2.1x FY17e

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Valuation and risks: "We maintain our Buy rating as we expect robust profitability (1.2% RoA post-tax) over FY15-17E, led by the bank’s prudent business growth strategy, focused network expansion and superior asset quality. We expect the stock to sustain its premium valuations led by stronger business growth, stable asset quality and greater capital adequacy ahead. Our target price of Rs 140 is based on the two-stage dividend-discount model (CoE: 15.9%; beta: 1.2; Rf: 7.5%)", says Emkay Global Financial Services research report.

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