Axis Securities Recommends Buying DCB Bank, Forecasts 23% Upside Potential

Axis Securities, a brokerage firm, has issued a buy recommendation for DCB Bank, a small-cap private sector bank. They have set a target price of Rs 150 per share, suggesting a potential upside of 23 per cent from the current level. With a market capitalisation of Rs 3,801.55 Crore, DCB Bank is expected to experience accelerated growth momentum in the coming years.

According to Axis Securities, DCB Bank has regained its growth momentum in FY23 and is projected to maintain it as the bank aims to double its balance sheet size within the next 3-4 years. The bank has shown improvements in collections in its core segment, and slippages have reached near-normalised levels. This positive trend is expected to keep credit costs muted and asset quality stable. Additionally, the bank is anticipated to benefit from operating leverage, improved fee income, and moderate credit costs, which will compensate for lower net interest margins (NIMs) in the future.

The stock of DCB Bank is currently deemed attractively valued at 0.7x FY25E adjusted book value (ABV). Axis Securities values the stock at 0.9x FY25E ABV, resulting in the target price of Rs 150 per share. This target price represents a 21 per cent upside from the current market price. Therefore, Axis Securities reiterates its Buy recommendation for DCB Bank.

As of the latest available information, DCB Bank's share price on the BSE is Rs 121.95 apiece, reflecting a 1.26 per cent decrease from the previous close. The stock's 52-week high and low stand at Rs 141.20 and Rs 75.55 per share, respectively. In the short term, the shares have witnessed a 4.20 per cent increase over one week, 2.58 per cent over two weeks, and 1.34 per cent over one month. Over a longer period, the stock has delivered a positive return of 57.62 per cent in one year, 15.94 per cent in two years, and 51.91 per cent in three years. However, it has incurred a negative return of 28.09 per cent over five years.