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Research
Development Credit Bank - Displayed An All Round Performance - Nirmal Bang
Posted On : 2013-01-21 19:53:18( TIMEZONE : IST )
CMP: Rs 49 / Target price: Rs 64
Development Credit Bank (DCB) reported good results yet again; driven by strong growth in advances leading to increase in NII, cost efficiency leading to an improvement in cost to income ratio and continuous efforts of the bank to improve profitability. PAT increased 72.5% YoY and 21.6% QoQ to Rs 26.9 cr. The bank is on the right track in terms of most of the performance parameters.
The bank has been reporting profit for ten consecutive quarters driven by NII, fee income, cost efficiency and controlled credit cost (expected range 0.5% for FY13E). We believe that the bank will embark on expansion plans over the next 2-3 years and gear itself for next innings. We expect the bank to report 52.9% CAGR in PAT over FY12-FY14E leading to RoE of 12.5% and RoA of 1.1% for FY14E.
At CMP, the stock is trading at 1.29x and 1.14x FY13E and FY14E Adj BVPS and 12.21x and 9.23x FY13E and FY14E EPS respectively which we believe is attractive and therefore we continue to maintain our BUY rating on the stock. Our target price for the stock is Rs 64 based on P/ABV multiple of 1.5x on its FY14E adjusted book value of Rs.42.6 per share.
