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Soaring profits but credit growth disappoints…
Reported profits at | 15.6 crore beat our estimates of | 11.7 crore boosted
by NII growth of 21% YoY in spite of lower credit growth at 8.9% YoY and
lower NPA provisions. Zero tax provisions continued since Q1FY12. NII
increased to | 59.7 crore growing 1% QoQ. Though GNPA dipped by | 4
crore to | 256 crore, NNPA increased by | 2 crore to | 44 crore, implying
that there has been an addition to GNPA but write offs to the tune of |10
crore have taken place. The overall asset quality condition remains
manageable for the bank at 1.03% NNPA.
We have revised business growth lower to 14.8% in FY12E from 18%
earlier and expect PAT to grow at 72% CAGR over FY11-13E.
Sluggish credit growth to result in lower annual growth…
Credit growth has plunged sharply from 23.5% YoY growth in FY11
to 8.9% YoY growth in Q3FY12. A slowing economy, high interest
rates and lack of branch addition (82 branches in Q3FY12) took a
heavy toll on credit growth. The corporate book came under
pressure in this quarter as it de-grew 6.2% QoQ to | 890.7 crore.
However, SMEs witnessed strong 8.4% QoQ growth to | 1287.3
crore. As the base effect also comes in picture for Q4FY12E, we are
revising FY12E credit growth target from 18.0% to 14.2%.
Margins guided lower
The management has guided a 20 bps moderation in Q4 NIM to
~3.2% on account of a dip in yield on advances as the bank needs
to increase agricultural exposure to achieve the priority sector
lending target. Cost of deposits is expected to remain high as sharp
rate cuts are unlikely and NRE rate de-regulation also adds to cost
pressure. Busy credit season in Q4 will also keep liquidity tight.
Valuation
At the CMP of | 41, DCB is trading at 1.1x its FY13E ABV. We expect
lower growth to be compensated by better asset quality and margins of
~3.2-3.3%. NII and profit will grow at 21.1% and 72.2% CAGR to | 277
crore and |63.6 crore, respectively, over FY11-13E. We maintain our
target price of | 60 from a 12-15 months perspective.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Soaring profits but credit growth disappoints…
Reported profits at | 15.6 crore beat our estimates of | 11.7 crore boosted
by NII growth of 21% YoY in spite of lower credit growth at 8.9% YoY and
lower NPA provisions. Zero tax provisions continued since Q1FY12. NII
increased to | 59.7 crore growing 1% QoQ. Though GNPA dipped by | 4
crore to | 256 crore, NNPA increased by | 2 crore to | 44 crore, implying
that there has been an addition to GNPA but write offs to the tune of |10
crore have taken place. The overall asset quality condition remains
manageable for the bank at 1.03% NNPA.
We have revised business growth lower to 14.8% in FY12E from 18%
earlier and expect PAT to grow at 72% CAGR over FY11-13E.
Sluggish credit growth to result in lower annual growth…
Credit growth has plunged sharply from 23.5% YoY growth in FY11
to 8.9% YoY growth in Q3FY12. A slowing economy, high interest
rates and lack of branch addition (82 branches in Q3FY12) took a
heavy toll on credit growth. The corporate book came under
pressure in this quarter as it de-grew 6.2% QoQ to | 890.7 crore.
However, SMEs witnessed strong 8.4% QoQ growth to | 1287.3
crore. As the base effect also comes in picture for Q4FY12E, we are
revising FY12E credit growth target from 18.0% to 14.2%.
Margins guided lower
The management has guided a 20 bps moderation in Q4 NIM to
~3.2% on account of a dip in yield on advances as the bank needs
to increase agricultural exposure to achieve the priority sector
lending target. Cost of deposits is expected to remain high as sharp
rate cuts are unlikely and NRE rate de-regulation also adds to cost
pressure. Busy credit season in Q4 will also keep liquidity tight.
Valuation
At the CMP of | 41, DCB is trading at 1.1x its FY13E ABV. We expect
lower growth to be compensated by better asset quality and margins of
~3.2-3.3%. NII and profit will grow at 21.1% and 72.2% CAGR to | 277
crore and |63.6 crore, respectively, over FY11-13E. We maintain our
target price of | 60 from a 12-15 months perspective.
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