HDFC Securities sees 45% upside in this banking stock. Should you buy?
Premium- HDFC Securities research report says that the banking stock may go up to ₹126 apiece levels in long term
DCB Bank share price has been under consolidation phase after hitting 52-week high of ₹106 on NSE in November 2021. It showed some signs of upside in April 2022 after hitting 52-week low of ₹67.85 in the end of March 2022. However, the stock further come under the sell-off pressure in June 2022 and come to the cusp of breaking its 52-week low made in March. However, the banking stock bounced back from its recent lows and DCB share price today is around ₹86 apiece levels. HDFC Securities believes that the stock may go up to ₹2126 apiece levels in long term , delivering around 45 per cent return to its shareholders.
Highlighting the fundamentals that may fuel DCB Bank share price, HDFC Securities report says, "DCB Bank’s earnings were significantly ahead of our estimates, driven largely by strong traction in loan growth (+17 per cent YoY) and lower credit costs (50bps - annualised), partially offset by elevated opex intensity. While gross slippages surged to around 8.3 per cent, driven by the gold loans and KCC portfolio (Q4FY22: 5.5 per cent), healthy upgrades/recoveries led to a marginal 10bps sequential improvement in GNPA, to 4.2 per cent."
"Stress pool continues to remain sticky (NNPA + restructured book at around 8 per cent of loans); however, management reiterated credit costs to remain range-bound (near 50 to 60 bps) on the back of improving collection efficiency and a granular and secured loan book (around 95 per cent). With stubborn stress pool and elevated opex intensity for driving business throughput, we see limited near-term levers to reflation in return ratios," the brokerage added.
On its suggestion to positional investors in regard to DCB Bank share price, HDFC Securities report says, "We trim our FY23/FY24 earnings estimates by 7%/5% to factor in NIM moderation and maintain ADD with a revised TP of ₹126."
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