DCB Bank Initiating Coverage Report By Motilal Oswal

Core earnings to remain healthy; re-rating to continue

We expect core revenues to clock a healthy CAGR of 26% over FY14-17, driven by strong loan growth and largely stable margins. Controlled opex and decline in C/I ratio would drive core PPP/PBT CAGR of ~35%, though increase in tax rate to 30% would keep earnings CAGR lower at 20%. Return ratios are likely to be in-line/better than industry average. As the bank delivers on core profitability, asset quality and market share, re-rating would continue. We initiate coverage with a target price of INR155 (2.2x/16.4x FY17E BV/EPS).

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