DCB Bank has experienced a healthy recovery in loan growth over the past two years after reporting tepid trends over FY20-22. The bank continues to focus on granular retail loans with a retail mix (ex-Agri) at 65% of the overall portfolio.
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DCB Bank Ltd. has seen a healthy recovery in loan growth after witnessing sluggish trends during FY20-22, and we estimate loan growth to remain steady at ~23% CAGR over FY25-27E.
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The bank's shift in loan mix toward retail loans has helped maintain healthy net interest margins. With a healthy retail mix, operating leverage at play, and a resilient NIM outlook, we expect DCB Bank to report sustained traction in the balance sheet and earnings growth. We thus estimate RoA to sustain at 0.9-1% for FY25-27E.
We find the current valuations at 0.52x FY26E adjusted book value attractive for a potential RoA of ~1% and ~26% earnings CAGR estimated over FY25-27E.
We reiterate our Buy rating with a target price of Rs 150 (premised on 0.8 times Sep'26E adjusted book value).
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