DCB Bank Q3 Results Review: IDBI Capital Maintains 'Buy' On The Stock, Sees 49% Upside — Here's Why

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IDBI Capital Report

DCB Bank Ltd’s net interest margin improved by 3bps QoQ to 3.3% led by increase in yield on assets. Management believes that margins have bottomed out thus will show an upward trajectory going ahead. Asset quality improved with gross non-performing asset at 3.11% vs 3.29% QoQ led by higher write offs. Banks deposits growth remained strong at 20% YoY; credit growth too witnessed strong growth at 23% YoY.

We expect 18% CAGR (FY25-27) credit growth. NII grew by 15% YoY led by decline in margins. Core fee income grew by 44% YoY; also management guided for sustainability which will drive return ratios higher.

Pre provision operating profit grew by 28% YoY led by higher non-interest income. PAT grew by 20% YoY led by higher provisions (up 64% YoY). We largely maintained the estimates and rolled over to FY27E. We maintain ‘Buy’ with a target price of Rs 170 valuing it at 0.8x P/ABV FY27E.

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