DCB Bank Ltd.

June 12, 2015 . Equities Desk

DCB Bank post the organisational re-structuring in 2009, has grown at a healthy pace, focussing on growth as well as profitability. DCB Bank emerged as a new generation private sector bank with 134 branches across 15 states and 2 union territories. Considering its healthy loan book growth, superior asset quality, stable NIM and steady branch network expansion, we believe DCB Bank is well poised to continue its growth trajectory. 

Valuation and view

DCB Bank has delivered another strong operating performance since last five years, on account of granular credit profile and healthy liability franchise. Given the bank’s relentless focus on improving asset management practices and adequate collateral cover, we expect the bank to maintain best asset quality among its peers. With strong balance sheet growth, we expect DCB Bank to grow much faster than its peers. Thus, we believe that better visibility of profitable growth along with stable asset quality & improving return ratios instils further confidence in the stock. Hence considering the improving fundamentals & strong growth prospects, we remain positive on the stock.

We initiate BUY rating on DCB Bank. At a current CMP of Rs 126, DCB Bank is currently trading at P/BV of 1.9x for FY16E and 1.6x for FY17E. Considering the bank’s strong fundamentals, we recommend ‘BUY’ with a target price of Rs 148, which implies potential upside of ~18% to the CMP from 1 year perspective.

Research Report DCB Bank Ltd

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