DCB Bank shares rally 14% in two days after good Q4 results

DCB Bank has moved 7.5% higher to Rs 205 on the BSE in intra-day trade on Tuesday, extending its Monday’s 6.4% gain, after the private lender reported better than expected 21% year on year (YoY) jump in net profit at Rs 640 million for the quarter ended March 2018 (Q4FY18). The bank had profit of Rs 530 million in the same quarter last fiscal.

Net interest income for the quarter under review grew 34% to Rs 850 million against Rs 630 million in the corresponding quarter of previous year.

Asset quality of the bank was steady quarter on quarter (QoQ) with gross net performing assets (NPA) ratio declining 10 bps to 1.79% and net NPA ratio falling to 0.72% against 0.87% QoQ.

“DCB has reported a healthy performance in terms of growth and asset quality in the past few quarters. Selection of credit opportunity in mortgage and small and medium enterprises (SME) segment stay key. Aggressive branch expansion in the last two years (from 198 to 318 now) would yield positive results, going ahead, as they break even,” analysts at ICICI Securities said in a result update. The brokerage recommended ‘buy’ rating on the stock with revise target price of Rs 215.

The brokerage firm Motilal Oswal Securities expects DCB Bank’s loan growth (23% CAGR) to stay ahead of system loan growth.

“We will wait to see if the improvement in cost to assets is sustainable, without which profitability will be muted in the near term, with RoA/ RoE at around 1%/10-11%. Valuations at 2.1x/19.5x FY19E BV/EPS leave limited upside,” the brokerage firm said in result update with maintains ‘Neutral’ rating on stock with a target price of Rs 198.

At 03:18 pm; DCB Bank was trading 6% higher at Rs 202 on the BSE, against 0.22% rise in the S&P BSE Sensex. The trading volumes on the counter jumped nearly 10-fold with a combined 18 million shares changed hands on the NSE and BSE so far.


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