Buy DCB Bank, target price Rs 110: Anand Rathi

Anand Rathi has buy call on DCB Bank with a target price of Rs 110. The current market price of DCB Bank Ltd. is Rs 83.95. Time period given by analyst is one year when DCB Bank Ltd. price can reach defined target.

DCB Bank Ltd., incorporated in the year 1995, is a banking company (having a market cap of Rs 2598.21 Crore).

DCB Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Standalone Total Income of Rs 1034.71 Crore, up 3.84 % from last quarter Total Income of Rs 996.42 Crore and up 6.54 % from last year same quarter Total Income of Rs 971.16 Crore. The bank reported net profit after tax of Rs 113.44 Crore in latest quarter.


Investment Rationale
Higher margins and moderating credit cost led to a strong increase in profitability for DCB, with RoA at ~1.1%. Higher slippages kept asset quality under pressure. Key positives for the quarter were 1) collection efficiency near pre-Covid levels, 2) strong recoveries/upgrades, 3) decline in stress across core segments, 4) strong traction in retail deposits and 5) strong pick-up in disbursements in its core mortgage book. With credit growth expected to pick up and normalising credit costs, earnings would improve. It maintains Buy rating, with a TP of Rs.110, valuing the stock at 0.7x P/ABV on the FY24e book.

Promoter/FII Holdings
Promoters held 14.87 per cent stake in the company as of 31-Dec-2021, while FIIs owned 9.24 per cent, DIIs 39.62 per cent.