DCB Bank - Q1FY21 Result Update - ICICI Securities

Posted On : 2020-08-12 12:48:02( TIMEZONE : IST )

DCB Bank - Q1FY21 Result Update - ICICI Securities

DCB Bank reported a sharp reduction in moratorium book as on June 2020 to ~26% vs. ~60% in April 2020. Segment wise, the bank said that 29.17% of business loans, 21.2% of home loans, 2.5% of MFI loans and 48.2% of commercial vehicles by value have not paid any instalment since April 2020. Apart from this, the bank reported that ~91% of SME customers have some credit churn in their accounts from April to July 2020. Provision surged 106% YoY to Rs. 84 crore, including Covid related provisioning of Rs. 32 crore. Total Covid provisioning as on June 2020 was at Rs. 95 crore i.e 40 bps of advances. In addition, the bank has additional floating provisions of Rs. 99 crore i.e ~0.4% of advances. PCR was at ~75.2% against 70.8% in Q4FY20. Slippages were lower at Rs. 5.2 crore, on the back of standstill asset classification. GNPA and NNPA ratio declined 2 bps and 17 bps QoQ to 2.44% and 0.99%, respectively.

Valuation & Outlook

Business momentum is expected to remain slow, though the bank remains a beneficiary of the credit guarantee scheme announced by GoI. Sharp decline in moratorium to 26% & ~80 bps of contingent provision provide comfort. However, relatively higher proportion of loans with no instalment paid since April 2020 remains a cause of concern. Focus on containing opex does provides cushion. However, lower business growth at ~3% CAGR in FY21-22E & anticipated asset quality woes are seen keeping RoE lower at 8-11% in FY21-22E. Therefore, we maintain our HOLD rating with a revised target price of Rs. 90 per share, valuing the business at ~0.8x FY22E ABV.

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Shares of DCB Bank Limited was last trading in BSE at Rs.82.95 as compared to the previous close of Rs. 82.5. The total number of shares traded during the day was 439956 in over 1308 trades.

The stock hit an intraday high of Rs. 83.55 and intraday low of 82.5. The net turnover during the day was Rs. 36653892.

Source : Equity Bulls