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India Equity Research Reports, IPO and Stock News
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H i g h e r N I I , z e r o t a x p r o v i s i o n b o o s t s P A T …
DCB reported Q2FY12E results, which were ahead of our expectations. NII
came in at | 59 crore (our estimate: | 51 crore) with zero tax provisions
maintained since Q1FY12 leading to PAT surging 176% YoY to | 13.3
crore (our estimate: | 7.9 crore). Even though business growth was in line
with our expectation at 13.3% YoY, NIM improved by 31 bps QoQ to
3.4% resulting in NII increasing 27% YoY. The loan book composition
changed in favour of SME-MSME and mortgages. The asset quality was
stable with GNPA flat QoQ at | 260 crore and NNPA down 16% QoQ to |
42 crore. The bank has pared down its business growth guidance to 16-
17% for FY12E. We expect business to grow at a CAGR of 20% boosting
PAT by 48% CAGR over FY11-13E.
ƒ Margins up 31 bps QoQ, NII growth beats expectation…
NII grew 27% YoY (14% QoQ), which was a positive surprise. This
was due to NIM inching up from 3.1% in Q1FY12 to 3.41% with
CASA maintained QoQ at 33% in Q2FY12. YoA increased by 80 bps
QoQ to 12.66% with CoF rising only 31 bps QoQ to 6.98%. DCB has
hiked its base rate in tandem with policy rate hikes to protect its
NIM. Even though it has been able to pass on the higher costs, we
believe it would be difficult for borrowers to absorb further increase
in costs and would lead to NIM softening to 3.15% by end of FY12E.
ƒ Changing loan book mix: Slump in agri & corporate, mortgages rise
Strategic intent is in place with the incremental loan book that has
been coming in from mortgages and SME-MSME with the agri
portfolio declining due to seasonality and corporate book shrinking
due to de-risking since the last two quarters. Mortgages rose a sharp
22% QoQ to | 1524 crore (35% of total loan book) while the agri
portfolio (share: 9%) decreased 45% QoQ due to repayments. We
expect a seasonal pick-up in agri in H2FY12E and overall growth of
18% for FY12E.
V a l u a t i o n
At the CMP of | 44, DCB is trading at 1.2x its FY13E ABV. Post
downgrading the target multiples for coverage universe banks in our
industry report dated September 23, 2011 (slippages to trend north…), we
have revised DCB’s target multiple from 1.8x to 1.6x FY13E ABV leading
to a lower target price of | 60. The trend of strong profitability and
expected QIP remain positive triggers for the bank in the near term
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r N I I , z e r o t a x p r o v i s i o n b o o s t s P A T …
DCB reported Q2FY12E results, which were ahead of our expectations. NII
came in at | 59 crore (our estimate: | 51 crore) with zero tax provisions
maintained since Q1FY12 leading to PAT surging 176% YoY to | 13.3
crore (our estimate: | 7.9 crore). Even though business growth was in line
with our expectation at 13.3% YoY, NIM improved by 31 bps QoQ to
3.4% resulting in NII increasing 27% YoY. The loan book composition
changed in favour of SME-MSME and mortgages. The asset quality was
stable with GNPA flat QoQ at | 260 crore and NNPA down 16% QoQ to |
42 crore. The bank has pared down its business growth guidance to 16-
17% for FY12E. We expect business to grow at a CAGR of 20% boosting
PAT by 48% CAGR over FY11-13E.
ƒ Margins up 31 bps QoQ, NII growth beats expectation…
NII grew 27% YoY (14% QoQ), which was a positive surprise. This
was due to NIM inching up from 3.1% in Q1FY12 to 3.41% with
CASA maintained QoQ at 33% in Q2FY12. YoA increased by 80 bps
QoQ to 12.66% with CoF rising only 31 bps QoQ to 6.98%. DCB has
hiked its base rate in tandem with policy rate hikes to protect its
NIM. Even though it has been able to pass on the higher costs, we
believe it would be difficult for borrowers to absorb further increase
in costs and would lead to NIM softening to 3.15% by end of FY12E.
ƒ Changing loan book mix: Slump in agri & corporate, mortgages rise
Strategic intent is in place with the incremental loan book that has
been coming in from mortgages and SME-MSME with the agri
portfolio declining due to seasonality and corporate book shrinking
due to de-risking since the last two quarters. Mortgages rose a sharp
22% QoQ to | 1524 crore (35% of total loan book) while the agri
portfolio (share: 9%) decreased 45% QoQ due to repayments. We
expect a seasonal pick-up in agri in H2FY12E and overall growth of
18% for FY12E.
V a l u a t i o n
At the CMP of | 44, DCB is trading at 1.2x its FY13E ABV. Post
downgrading the target multiples for coverage universe banks in our
industry report dated September 23, 2011 (slippages to trend north…), we
have revised DCB’s target multiple from 1.8x to 1.6x FY13E ABV leading
to a lower target price of | 60. The trend of strong profitability and
expected QIP remain positive triggers for the bank in the near term
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