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StocksDB › StocksDB › Hawk-Eye On The Stock Markets › DCB Bank Initiating Coverage Reports By Emkay & Motilal Oswal + Result Update By Edelweiss
Tagged: DCB Bank, Edelweiss, Emkay, Motilal Oswal
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.
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.
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