DCB Bank Initiating Coverage Reports By Emkay & Motilal Oswal + Result Update By Edelweiss

We initiate coverage on DCB Bank with a Buy rating and a target of Rs140. We expect its prudent business growth strategy, focused network expansion and superior asset quality to drive 1.2% ROA (post tax) over FY15-17E. With a proven management team and high capital adequacy, the bank is well positioned to exploit profitable business opportunities in its next growth phase.

DCB Bank Initiating Coverage

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).

Download DCB Bank IC Report By Motilal Oswal

Amidst challenges, DCB has recorded remarkable turnaround. Now, with ammunition in place—well-capitalised (tier 1 at 13.6%), strong management, robust systems and strategic branch network—we expect the bank to deliver steady performance. The stock is trading at 1.7x FY17E ABV. We maintain ‘BUY/SO’, with target price of INR140.

Download DCB Bank report by Edelweiss