The shares of this leading private sector bank gained 4.3% to ₹143.50 after the brokerage upgraded the stock for an upside of 23 percent.
On Thursday, DCB Bank Ltd shares were trading at ₹142, up 3.55 percent from the previous close on the National Stock Exchange. The company has a market capitalization of ₹4,455 crore.
DCB Bank was incorporated in 1995, by reconstituting the Development Co-operative Bank Ltd (DCBL) to Development Credit Bank Ltd as a joint-stock banking company.
The bank offers mobile and internet banking services, with approximately 131,000 customers actively using the mobile banking application and around 30,000 retail users using internet banking.
Over the past 12 months, shares of DCB Bank Ltd have surged by 23 percent. Additionally, in the last six months, the share value has increased by 13 percent.
The bank has experienced a annual increase in revenue of 22 percent, moving from ₹1,179 crore in Q4FY23 to ₹1,445 crore in Q4FY24. During the same timeframe, net profit surged by 10 percent, rising from ₹142 crore to ₹156 crore
Motilal Oswal Financial Services upgraded DCB Bank from ‘neutral’ to ‘buy’ of ₹175 per share with an upside of 23 percent based on Thursday’s trading price of ₹142.80.
DCB Bank has seen a healthy recovery in loan growth after witnessing sluggish trends during FY20-22. The bank’s shift in loan mix toward retail loans has not only shielded its margins but also provided stable, profitable growth.The bank continues to focus on granular retail loans, with the share of mortgages rising to 45% from 41% in Mar’22. Motilal Oswal reported.
Brokerages expect gross non-performing asset (GNPA) and net non-performing asset (NNPA) ratios to improve to 2.6 percent and 0.8 percent, respectively, by FY26, with credit costs projected to remain at 0.5 percent in FY26E.
Motilal Oswal forecasts an 18 percent CAGR in the bank’s overall balance sheet for FY24-26E, with advances and deposits expected to grow at a 19-20 percent CAGR over the same period.
Meanwhile, DCB Bank plans to expand its branch network by 15-20 branches annually in a cluster-based approach, aiming to double the balance sheet over the next 3-4 years.
Despite a lower current and savings account (CASA) ratio of 26 percent, the bank has maintained healthy net interest margins in the range of 3.6-4 percent. Analysts anticipate margins to sustain at around 3.65 percent over FY25-26E, supported by stable funding costs.
The current valuation of 0.7x FY26E adjusted book value (ABV) appears compelling, especially considering the estimated 21 percent earnings compound annual growth rate (CAGR) for FY24-26E, the brokerage firm said in a recent report.
The bank has a large branch network of 442 branches across India as of March 31, 2024. The bank also has an ATM network of 418 as of March 31, 2024.
Written by Omkar Chitnis
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