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Centrum Broking
DCB Bank (Buy)
CMP: ₹162.55
Target: ₹215
We retain ‘buy’ on DCB Bank (DCBB) with target price at ₹215. First quarter (Q1) results of FY19 beat our estimates on both revenue and earnings front. Net interest margin (NIM) at 3.56 per cent declined 12 bps q-o-q and was well on the expected lines. While we foresee some improvement in NIM (especially in H2FY19), the overall trend will remain lower for FY19E (over FY18). Our calculation suggests employee productivity on rise; continued momentum will aid in increased profitability. Loan growth momentum remains intact, asset quality under check, capital position strong; we see return on assets (RoA) / return on equity (RoE) inch towards 1.1 per cent / 14.4 per cent by end-FY20E. Valuations at 1.6x FY20E ABV remain attractive.
Key risks: Lower loan growth, elevated operating costs or higher than expected NIM pressure.
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