ICICI Securities recommends DCB Bank with an upside of 21%
1 min read . Updated: 11 Dec 2020, 09:37 AM ISTCurrent market price of a share of DCB Bank is ₹114.90.
A better-than-expected revival in the economy will propel credit growth across the board and especially in small business. Government initiative to support MSME segment by extending ECLGS scheme is helpful for players like DCB who have good exposure towards such segments. ICICI Securities has upgraded the banking stock from Hold to Buy rating with a target price of ₹135.
Current market price of a share of DCB Bank is ₹114.90.
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Here are the key points of the report:
> Cautious outlook is expected to keep advances growth moderate in FY21E. Focus remains on granular secured loan segment including gold loans, LAP and tractor loans.
> Unlocking of economy and resultant improving collection bodes well for the asset quality outlook. Incremental restructuring expectation remains low at 3-5% of advances. Cumulative contingency buffer at ~57 bps somewhat looks on the lower side, which is seen keeping credit cost on the higher side in the coming two quarters.
> Adequate capital adequacy keeps away near term dilution risk. Inclination of promoters to increase stake (if current cap revised by RBI) provides comfort.
DCB Bank reported nearly 10% decline in net profit at ₹82 crore for Q2 as provisions rose. The bank logged a net profit of ₹91 crore in the same quarter of the previous fiscal year.
Profit before tax for the quarter was impacted by ₹48 crore COVID-19 regulatory package provision.
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Total income also fell marginally to ₹970.98 crore in July-September 2020-21 as against ₹980.59 crore in the year-ago same period.
Net interest income grew 7% to ₹334 crore, while the non-interest income fell by 9% to ₹92 crore.
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