Hold DCB Bank; target of Rs 207: Edelweiss

Edelweiss recommended hold rating on DCB Bank with a target price of Rs 207 in its research report dated July 16, 2018.

Broker Research

September 18, 2018 / 15:33 IST

Edelweiss' research report on DCB Bank

DCB Bank’s (DCB) Q1FY19 PAT of INR695mn (up 7% YoY) is broadly in line with our estimates. Key highlights: a) loan growth rose >30% YoY, but lower NIMs (down 19bps QoQ) kept NII growth below trend at ~17% (25–30% run-rate over previous quarters); b) Asset quality was steady with slippages at 2.1% leading to GNPLs of 1.86% (1.79% in FY18); and c) persistently high cost-income ratio (~60%, albeit improving).

Outlook As DCB is nearing its branch expansion exercise, we anticipate operating leverage benefits would start flowing in. That said, despite factoring in an improving revenue momentum, we expect RoE to be sub-par (12–13% even by FY20) on high cost ratios, implying limited upside from current level. Maintain ‘HOLD’.

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