DCB Bank Ltd. share price forecast

Recommendation: We recommend a BUY rating on the stock with a TP of Rs 116, implying an upside of 10% from CMP.

Aditya Birla Sun Life AMC: ABSLAMC reported a weak quarter, with a sequentially flat top line (4% miss), primarily due to elevated outflows and weak performance in the equity segment. While SIP flows (+1% QoQ) are holding up, growth in the SIP book lagged the industry by a mile (+6% QoQ). We are constructive on ABSLAMC's strong and diversified distribution network; however, given the rising competitive intensity, we are concerned about its inability to arrest the equity market-share loss in the near term. We trim our FY23E/24E/25E earnings by 9/11/8% to factor in tepid equity flows, partly offset by the expected rebound in debt scheme inflows. We expect 4.9/3.8% revenue/operating profit CAGR respectively over FY22-25E, on the back of soft AUM growth, partly offset by lower yields. We maintain BUY with a lower TP of INR525 (implying 21x Sep-24E NOPLAT + Sep-23E cash and investments). DCB Bank: DCB Bank's Q3FY23 earnings beat our estimates, on the back of strong loan growth (+19% YoY), NIM expansion (14bps QoQ), and moderate credit costs (60bps - annualised). While gross slippages remained elevated at 5.3%, healthy upgrades and recoveries led to a 27bps sequential improvement in GNPA, at 3.6%. Stressed book (NNPA + restructured book) continues to remain sticky at ~7% of loans; however, management expects it to taper off in the next couple of quarters, led by healthy collection efficiencies and a granular secured loan book (~95%). DCBB continues to make investments in employees/branches (1.5K/18 added during 9MFY23) to capitalise on the growth opportunities and double the balance sheet...

The stock currently trades at attractive valuations of 0.7x Sep'24E ABV and we value the stock at 1x Sep'24E ABV to arrive at a target price of Rs 150/share, implying an upside of 32% from CMP. We re-iterate a BUY recommendation on the stock.

DCB Bank’s (DCB) Q3FY23 financial performance is characterised by steady improvement in core operating performance and continued moderation in fresh slippages. Strong credit growth at 21% YoY and 41bps YoY.

Hindustan Petroleum Corporation: Our ADD rating on Hindustan Petroleum Corporation (HPCL) with a price target of INR 253 is premised on (1) recovery in domestic demand for petroleum products and (2) robust refining margins over the coming 18 months. Q2FY23 EBITDA loss stood at INR 15bn, below our estimated loss, owing to lower crude throughput, weak marketing segment performance, and higher inventory loss. Reported GRM stood at USD 8.4/bbl (HSIE: USD 9.2/bbl). Relaxo Footwears: Relaxo disappointed on its Q2FY23 print. The double whammy of inflation-led pressure on consumer demand and production costs continued. Revenue declined 6% YoY to INR6.7bn in Q2 (a three-year CAGR: 3%; HSIE: INR7.36bn). Volume/net realisation growth stood at -15/11% YoY respectivelya function of (1) increasing skew of closed footwear in the mix; (2) soft demand (esp. in Hawaii/PU/EVA segment). Profitability remains sub-optimal, thanks to high RM inflation in key inputs. Price correction of 15-20% will be taken to spur demand, going forward. We've cut our estimates by ~8/5% each for FY24/25 to account for lower profitability. Our DCF-based TP stands revised at INR700/sh (earlier INR750/sh); implying 46x Sep-24E P/E. Maintain SELL. DCB Bank: DCB Bank's earnings were in line with our estimates, on the back of strong loan growth (+17% YoY) and lower credit costs (40bps - annualised), partially offset by elevated opex intensity. Gross slippages stayed elevated at 6.3% (Q1FY23: 8.3%), driven by slippages in a handful of legacy corporate accountshealthy organic upgrades/recoveries led to a 30bps sequential improvement in GNPA, at 3.9%. Stress pool continues to remain sticky (NNPA +...

DCB Bank’s (DCB) Q2FY23 financial performance has been characterised by improvement in core operating performance as reflected in its strong 10% QoQ NII growth, 19% QoQ growth in core fee income, steady decline in NPL ratio and improved visibility in credit growth acceleration in coming quarters.

DCB Bank’s (DCB) credit growth trajectory was impacted sharply during the past three years due to corporate book consolidation in FY19 and pandemic between FY20-FY22.

DCB Bank: DCB Bank's earnings were significantly ahead of our estimates, driven largely by strong traction in loan growth (+17% YoY) and lower credit costs (50bps - annualised), partially offset by elevated opex intensity. While gross slippages surged to ~8.3%, driven by the gold loans and KCC portfolio (Q4FY22: 5.5%), healthy upgrades/recoveries led to a marginal 10bps sequential improvement in GNPA, to 4.2%. Stress pool continues to remain sticky (NNPA + restructured book at ~8% of loans); however, management reiterated credit costs to remain range-bound (~50-60bps) on the back of improving collection efficiency and a granular and secured loan book (~95%). With stubborn stress pool and elevated opex intensity for driving business throughput, we see limited near-term levers to reflation in return ratios. We trim our FY23/FY24 earnings estimates by 7%/5% to factor in NIM moderation and maintain ADD with a revised TP of INR126 (0.9x Mar-24 ABVPS). Indian Oil Corporation: Our ADD rating on Indian Oil Corporation (IOCL) with a target price of INR 82 is premised on (1) recovery in domestic demand for petroleum products, (2) improvement in refining margins for FY23/24, and (3) gradual improvement in marketing margins over FY23-24 vis--vis FY22 levels. DLF: During Q1FY23, DLF booked robust presales of INR 20.4bn (+101/-25% YoY/QoQ) and maintained FY23 presales guidance of INR 80bn. During the quarter, it launched 0.7msf, with 7.6msf in pipeline for FY23 (6msf launched in FY22). In value terms, for Q2/Q3/Q4FY22, launches worth INR 20/25/20-25bn are in the pipeline. New products contributed 75% to sales in Q1FY23 and are expected...

We retain our estimates and maintain our BUY recommendation on the stock with a target price of Rs 115/share, implying an upside of 54% from the CMP.

Federal Bank: Federal Bank's (FB) Q4FY22 earnings missed our estimates, largely on account of accelerated absorption of family pension expenses, but these were partly offset by multi-quarter low credit costs (20bps). Margin moderated on the back of income reversal from slippages in the agri portfolio. Overall asset quality continued to impress, with negative net slippages and a 20bps sequential decline in the restructured book (2.4%). The bank's industry-leading FinTech ecosystem partnerships continue to drive new customer acquisitions and these are expected to contribute materially on both sides of the balance sheet, resulting in better business productivity. We tweak our FY23E/FY24E earnings marginally to factor in near-term margin outcomes and higher opex from continued investments; we maintain BUY, with a revised target price of INR126 (1.2x Mar-24 ABVPS). DCB Bank: DCB Bank's (DCBB) Q4FY22 earnings beat estimates due to lower credit costs (1% annualised), better loan growth (+12% YoY) and margin reflation. Gross slippages continued to remain elevated (~5.5%), mainly stemming from the gold portfolio, largely offset by higher recovery/upgrades, resulting in a GNPA of 4.3%. Stress pool continues to remain sticky (NNPA + restructured book at 8.4% of loans) but the management expects improving collection efficiency to reflect in better asset quality on the back of a granular and secured portfolio (~95%). With asset quality still stubborn and loan growth looking soft, we see limited room for any positive surprise from operating efficiency, thus keeping return ratios in check. We trim our FY23/FY24 earnings estimates marginally and maintain ADD with a revised target price of INR132...

We believe the stock trades at attractive valuations (0.5x FY24E ABV) and the improving operating performance and asset quality are key triggers for re-rating the stock. We maintain our BUY rating with a target price of Rs 115/share (0.8x FY24E ABV), implying an upside of 47% from CMP.

Background: DCB Bank Limited (formerly Development Credit Bank Limited) has a deposit base of 317bn and advances of 268bn at the end of 2QFY22, making it the smallest bank in the listed private sector space, including both new and old generation private sector banks. Promoter group the Aga Khan Fund for Economic Development (AKFED) & Platinum Jubilee Investments holds ~15% stake. DCB services entail Corporate Banking - 11%, SME -10%, Agriculture 22%, Mortgages...

We maintain our BUY rating with a revised target price of Rs 115/share (0.8x FY24E ABV), implying an upside of 32% from CMP.