Buy DCB Bank; target of Rs 223: Cholamandalam Securities

Cholamandalam Securities' research report on DCB Bank

DCB��s advances continued to grow at a healthy pace (30.6% YoY, 4.5% QoQ) to INR 212bn in 1QFY19. Commercial Vehicles & Corporate segments witnessed higher growth (56.7% and 48% YoY respectively), although their relative share in overall portfolio continued to remain unchanged at 6% and 17% respectively.SME and Agricultural credit grew at 42.5% and 38.3% YoY respectively. The bank targets to double its overall asset portfolio in the next 3 years.

Outlook

DCB trades at 1.5X FY20E P/ABV and 11.7X FY20E P/E.� Healthy loan book growth, branch expansion and well-maintained asset quality paints a positive picture for the bank. This apart, considering its efforts to contain the cost to income ratios, to maintain healthy return ratios despite expected pressure on NIMs, we give the stock a BUY rating with a target price of INR 223, assigning a FY20E P/ABV of 2X.

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Read More First Published on Jul 20, 2018 05:12 pm