Motilal Oswal's research report on DCB Bank
DCBB reported a strong 4QFY22, with a healthy beat on NII/PPOP, while PAT stood strong at INR1.1b (+46% YoY; MOSLe: INR872m), driven by lower provisions. NIM improved sharply (+32bp QoQ) to 3.92%. On the business front, advances/deposits grew strongly by ~5%/7.6% QoQ. GNPAs/NNPAs declined by 4%/18% as slippage moderated to INR3.78b (INR4.57b in 3QFY22). However, the outstanding restructured book stands elevated at INR18.7b (6.4% of loans). Collection efficiency remains steady within Home loans/LAP, but continued to be lower in the CV portfolio. We turn constructive on the stock, given that the earnings outlook is improving, growth momentum is gathering pace, and the stock is trading at attractive valuations of 0.6x FY24E P/ABV.
We remain watchful of asset quality due to a higher restructuring book, while rising interest rate may result in treasury losses/NIM pressure, which could dent the earnings recovery. We raise our FY23/FY24 estimate by 9%/10% and expect a FY24 RoA/RoE of 1%/12.4%. We maintain our Neutral rating.
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