Sell DCB Bank; target of Rs 51: Emkay Global Financial

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Emkay Global Financial's report on DCB Bank

Subdued credit growth and weakening CASA profile continued to weigh in on DCB’s margins, which coupled with Covid-19 related contingent provisions (Rs630mn; 0.2% of loans), led to lower PAT of Rs687mn - down 29% yoy. The GNPA ratio deteriorated by 31bps QoQ to 2.46% vs. 1.84% a year ago due to higher slippages of Rs1.5bn, mainly from the LAP/CV portfolio. Nearly 60% of customers by value have opted for moratorium given the bank’s main customers being self-employed. Factoring in slower growth, lower margins and higher LLP in the wake of deteriorating asset quality, we cut our earnings estimates for FY21/FY22 by 29/26% and expect RoA to slip to a low of 0.6-0.7% from 0.9% in FY20.

Outlook

We maintain Sell/UW in EAP with a revised TP of Rs51 (based on 0.5x FY22E ABV) given weakening asset quality, liability profile and return ratios. Instead, we prefer City Union Bank that offers much better return metrics in the small-cap space.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More