Buy DCB Bank; target of Rs 240: JM Financial

JM Financial’s research report on DCB Bank

DCB Bank reported PAT of INR 695mn in 1QFY19, a tad below our estimates (4% below JMFe). The miss in PAT was largely driven by continued increase in opex (+17.5% YoY) as the moderation in topline growth (+17% YoY) was in-line with our estimates. DCBB witnessed compression in margin (26 bps QoQ) to 3.9% in 1QFY19, while balance sheet growth was strong (both loans and deposits were up 31% YoY). While competitive forces have resulted in headwinds for DCBBs yields, we remain constructive on DCBBs potential to improve its RoA, primarily driven by an improvement in its cost profile. We believe current levels provide an attractive entry point for the stock. We factor in the compression in NIM and cut our estimates by 2%/ 4% for FY19E and FY20E.

Outlook

We value DCBB at INR 240/sh (from INR 250/sh earlier), in line with the change in our earnings estimates. Maintain BUY.

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First Published on Jul 18, 2018 05:19 pm

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