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DCB Ver 2.0
Over the last four years, DCB Bank’s management
has meticulously nursed back an ailing business (3%
NNPA, 81% C-I in FY10) to good health. The
improvement on both the crucial parameters (1.1%
NNPA, ~61% C-I) is doubly creditable as it has been
achieved in the face of macro headwinds and with
steadily increasing granularity.
Driven by further improvement in C-I as well as
expanding NIMs, we think PPoP margins will hit ~3%
by FY16E (+40bps over FY14). Higher tax provisions
will limit RoA expansion, though.
We reckon a further re-rating is imminent, driven by
(1) steady growth resulting in further oplev (2) stable
and conservative management (3) adequate capital
post the recent fund raise at Rs 82/sh. We believe
DCB should trade at a premium to peers, given its
superior growth and quality metrics. BUY with a TP
of Rs 126 (1.8x FY17E ABV)
LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3009937
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