DCB Bank - Q2FY21 Result Update - ICICI Securities

DCB Bank reported weak Q2FY21 results with controlled opex being the only silver lining. Muted business growth and elevated provisioning were the laggards, which impacted overall PAT. Moratorium book (by value) as of September 2020 was at Rs. 356 crore (~1.4% of advances) against Rs. 1908 crore in March 2020. The morat book further reduced to Rs. 313 crore as on October 26, 2020. Segment wise, the bank said 7.4% of business loans, 5.4% of home loans and 10.8% of commercial vehicles by value have not paid any instalment in April-October 2020. Collection efficiencies for the same segments were at 87.5%, 91.3% and 77.1%, respectively. The bank expects ~3-5% of overall advances to be restructured under the RBI's resolution framework for Covid-19 stress.

Valuation & Outlook

The management plans to pedal credit growth from Q4FY21 onwards with focus on gold loans, LAP, tractor loans & kisan credit cards. We expect NPA to increase in the ensuing quarter or two, thus keeping credit costs elevated. Such elevated credit costs would cap growth in earnings and thereby return ratios. Improvement in collection efficiencies bodes well. However, as a substantial portion of customers have not paid any EMI, we would await clarity on restructured book (3-5% guidance). Thus, on the back of a gradual pick-up in return ratios and ambiguity on asset quality, we maintain our HOLD rating on the stock with a revised target price of Rs. 85 per share, valuing the business at ~0.7x FY22E ABV.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DCB_Q2FY21.pdf

Shares of DCB Bank Limited was last trading in BSE at Rs.78.05 as compared to the previous close of Rs. 77. The total number of shares traded during the day was 78947 in over 1430 trades.

The stock hit an intraday high of Rs. 78.55 and intraday low of 75.75. The net turnover during the day was Rs. 6088028.

Source : Equity Bulls

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