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Arihant Capital
DCB Bank (Buy)
CMP: ₹82.75
Target: ₹116
Development Credit Bank, while steadily growing advances and fairly maintaining its asset quality, reported decent earnings performance. DCB recorded profit growth of 4 per cent y-o-y to ₹44.6 crore, however, its profit before tax grew 36 per cent y-o-y to ₹58 crore. PAT growth was lower due to tax outgo of ₹13.7 crore compared with nil in Q1 FY14. The retail liability (79 per cent of total deposits) led growth strategy is not completely in line with expectations. Improvement in liability franchise stands as key priority for the bank. Despite challenging environment, bank is able to keep its NPA under control. Gross NPA for the quarter stood at 1.78 per cent while net NPA was 0.97 per cent. DCB Bank had a strong loan growth with superior asset quality; however, we have valued DCB at discount to its peers because of higher proportion of retail deposits in total deposits.
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