RESULT UPDATE DCB BANK...
Transcript of RESULT UPDATE DCB BANK...
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Edelweiss Securities Limited
DCB Bank’s (DCB) Q2FY18 PAT at INR589mn (up 21.5% YoY) belied our estimate on lower-than-expected non-interest income (lower investment profit). Key highlights: a) yet another quarter of >30% NII growth; b) slippages were contained at 1.9% (~2.0% past 8 quarters’ run rate), with credit cost curtailed at sub-80bps; and c) opex continued to be elevated on sustained branch expansion (cost-to-income ratio at >60%), restricting core profitability. DCB is at the fag end of its branch expansion exercise and operating leverage benefits are now likely to be apparent. We believe,
despite strong revenue momentum, RoE will be sub-par (at 11-12%) due to high cost ratios and recent capital raising, entailing limited upside from current level. Maintain ‘HOLD’.
Revenue momentum intact, but sustainability key NII momentum sustained (up >30% YoY) on above-industry loan spurt (up ~20% YoY on
higher base; albeit QoQ growth was ~7%) and superior NIMs (4.2%). While yields have
been under pressure, better funding cost and capital raising benefits have helped
improve NIMs. Going ahead, yields run the risk of declining as MCLR rate is >70bps
lower than the base rate despite 20bps rate cut in Q1FY18. Consequently, we
anticipate some pressure on NIMs and, hence, estimate ~23% NII CAGR over FY17-19.
Productivity improvement vital DCB continued its branch expansion exercise (added 16 in Q2FY18), taking the total
count to 306. Now the bank is at the fag end of its investment phase. But, cost ratios
are still running high and operating efficiency & productivity improvement in new
branches are vital for revenue traction (better productivity at recently added branches
is a key monitorable). Cost/income will be key trigger for improvement in return ratios.
Outlook and valuations: Fairly valued; maintain ‘HOLD’ While revenue traction has been softer than we would prefer, asset quality lends
comfort. Estimating >28% plus earnings CAGR over FY17-19 with operating leverage
benefits, we value DCB at 2.2x FY19E ABV for an RoE potential of 11-12%. This yields
target price of INR200. Monitorables are: 1) blip in productivity could mar revenue
traction; b) adverse impact of GST on MSME segment; and c) rising NPLs in the LAP
segment.
RESULT UPDATE
DCB BANK Soft quarter
COMPANYNAME
COMPANYNAME
EDELWEISS 4D RATINGS
Absolute Rating HOLD
Rating Relative to Sector Performer
Risk Rating Relative to Sector Medium
Sector Relative to Market Overweight
MARKET DATA (R: DCBA.BO, B: DCBB IN)
CMP : INR 184
Target Price : INR 200
52-week range (INR) : 213 / 100
Share in issue (mn) : 307.8
M cap (INR bn/USD mn) : 57 / 871
Avg. Daily Vol.BSE/NSE(‘000) : 2,317.2
SHARE HOLDING PATTERN (%)
Current Q1FY18 Q4FY17
Promoters *
15.0 15.0 16.2
MF's, FI's & BK’s 22.8 20.5 17.1
FII's 21.4 22.5 23.5
Others 40.7 41.9 43.2
* Promoters pledged shares (% of share in issue)
: NIL
PRICE PERFORMANCE (%)
Stock Nifty EW Banks and
Financial Services Index
1 month (3.3) 1.5 (1.1)
3 months (7.3) 3.2 1.7
12 months 46.2 20.1 26.8
Kunal Shah +91 22 4040 7579
Prakhar Agarwal +91 22 6620 3076
Malav Simaria +91 22 6623 3357
India Equity Research| Banking and Financial Services
October 17, 2017
Financials (INR mn)
Year to March Q2FY18 Q2FY17 Growth % Q1FY18 Growth % FY17 FY18E FY19E
Net revenue 3,134 2,519 24.4 3,189 (1.7) 10,466 13,131 15,712
Net profit 589 485 21.5 652 (9.7) 1,997 2,685 3,299
Dil. EPS (INR) 1.9 1.7 11.3 2.1 (11.8) 7.0 8.7 10.7
Adj. BV (INR) 65.2 80.8 91.5
Price/ Adj book (x) 2.8 2.3 2.0
Price/ Earnings (x) 26.3 21.1 17.1
Banking and Financial Services
2 Edelweiss Securities Limited
Table 1: Summary of Q2FY18 performance
(INR mn) Q2FY18 Q2FY17 Growth (%) Q1FY18 Growth (%) Comments
Net interest income 2,481 1,903 30.4 2,332 6.4 NII growth continues to maintain momentum. NIMs
benefitting from lower funding cost and fund raising,
while yields are under pressure. We expect some
moderation in NIMs.
Other income 653 616 5.9 858 (23.9) Other income softer given lower treasury income and
some softness in core fee profile.
Operating expenses 1,890 1,511 25.1 1,825 3.5 Opex continues to run at elevated levels; having said
that, productivity improvement will hold key.
Staff expense 921 748 23.1 905 1.8
Other opex 969 762 27.1 920 5.2
Pre prov Op profit (PPP) 1,244 1,009 23.4 1,364 (8.8)
Provisions 302 265 14.2 355 (14.8) Slippages were contained at 1.9% (run-rate of >2% in
past 8 quarters), with credit cost managed at sub-
80bps.
Profit before tax 942 744 26.6 1,009 (6.6)
Provision for tax 353 259 36.2 357 (1.1)
Profit after tax 589 485 21.5 652 (9.7)
EPS (INR) 1.9 1.7 11.3 2.1 (11.8)
Balance sheet (INR mn)
Advances 1,73,950 1,44,362 20.5 1,62,657 6.9 Loan growth was slower than trend at ~20% YoY (partly
on higher base, albeit on QoQ basis it grew 7%). Loan
growth was driven by ~30% YoY growth in SME/MSME
and ~50% YoY growth in CV loans (albeit on lower
base).
Deposits 2,05,671 1,76,846 16.3 1,91,548 7.4
CD ratio (%) 84.6 81.6 84.9
Asset quality (INR mn) 0.1 0.1 0.1 0.1 0.1
Gross NPA 3,158 2,554 23.7 2,853 10.7 Asset quality continues to be steady. The slippages
were curtailed at 1.9% after 3 quarters of > 2% run-rate.
Segment wise analysis suggests that slippages flowed
from mortgage and agri segments.
Gross NPA (%) 1.8 1.8 1.7
Net NPA 1,570 1,209 29.8 1,491 5.3
Net NPA (%) 0.9 0.8 0.9
Restructured book 0.2 0.2 0.2
Overall stress book 2.0 2.0 1.9
DCB Bank
3 Edelweiss Securities Limited
Table 2: Loan growth at ~20% YoY, CD ratio at ~85%
Source: Company
Table 3: Margins maintained at 4.2%, sustenance key
Note: NIM, Yield on advances and Cost of funds in Q4FY16 column pertains to full year FY16 and in Q3FY16 column pertains to 9MFY16
Table 4: NPAs composition
Note: CV/STVL represents commercial vehicle and small ticket vehicle loan
Chart 1: Loan mix stable; higher focus on secured lending
Source: Company
Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18
Advances (INR mn) 1,11,809 1,17,362 1,29,214 1,33,369 1,44,362 1,45,844 1,58,176 1,62,657 1,73,950
Advances growth Q-o-Q (%) 7.2 5.0 10.1 3.2 8.2 1.0 8.5 2.8 6.9
Advances growth Y-o-Y (%) 27.2 23.7 23.5 27.9 29.1 24.3 22.4 22.0 20.5
Deposits (INR mn) 1,35,573 1,40,835 1,49,260 1,56,796 1,76,846 1,88,395 1,92,892 1,91,548 2,05,671
Deposit growth Q-o-Q (%) 2.2 3.9 6.0 5.0 12.8 6.5 2.4 (0.7) 7.4
Deposit growth Y-o-Y (%) 24.4 18.8 18.4 18.2 30.4 33.8 29.2 22.2 16.3
CD ratio (%) 82.5 83.3 86.6 85.1 81.6 77.4 82.0 84.9 84.6
CASA (%) 24.1 22.9 23.4 23.1 21.9 25.9 24.3 26.9 25.9
(%) Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18
NIM 3.8 4.0 3.9 4.1 4.0 4.0 4.0 4.2 4.2
Yield on advances 12.5 12.3 12.5 12.2 12.0 12.0 12.0 11.7 11.2
Cost of funds 7.6 7.4 7.5 7.3 7.2 6.9 7.0 6.6 6.4
(INR mn) Q2FY18 Q2FY17 YoY Q1FY18 QoQ
Mortgages 1,164 743 56.7 1,002 16.2
CV/STVL 294 134 119.4 215 36.7
Corporate 675 861 (21.6) 675 0.0
Others 1,025 816 25.6 961 6.7
Total NPLs 3,158 2,554 23.6 2,853 10.7
Commercial Vehicle
5%
AIB17%
Corporate Banking
17%
SME+MSME
12%
Mortgages42%
Gold Loans2%
Others2% Constructi
on Finance3%
Q2FY18Commercia
l Vehicle5%
AIB17%
Corporate Banking
15%
SME+MSME
11%
Mortgages44%
Gold Loans2%
Others3% Constructi
on Finance3%
Q1FY18
Banking and Financial Services
4 Edelweiss Securities Limited
Chart 2: Cost-income ratio elevated, remains key monitorable
Source: Company
50.0
54.0
58.0
62.0
66.0
70.0
Q2
FY1
6
Q3
FY1
6
Q4
FY1
6
Q1
FY1
7
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
(%)
Cost / income
DCB Bank
5 Edelweiss Securities Limited
Financial snapshot (INR mn) Year to March Q2FY18 Q2FY17 % change Q1FY18 % change YTD18 FY18E FY19E
Interest income 5,870 5,063 15.9 5,660 3.7 11,530 24,673 29,466 Interest exp 3,389 3,160 7.3 3,329 1.8 6,717 14,552 17,284
Net int. inc. 2,481 1,903 30.4 2,332 6.4 4,813 10,120 12,182
Other income 653 616 5.9 858 (23.9) 1,510 3,010 3,530
Net revenues 3,134 2,519 24.4 3,189 (1.7) 6,323 13,131 15,712
Operating expenses 1,890 1,511 25.1 1,825 3.5 3,715 7,792 9,317
Staff expense 921 748 23.1 905 1.8 1,826 3,883 4,600
Other opex 969 762 27.1 920 5.2 1,889 3,909 4,717
Pre prov op profit 1,244 1,009 23.4 1,364 (8.8) 2,609 5,339 6,395
Provisions 302 265 14.2 355 (14.8) 657 1,271 1,397
Profit before tax 942 744 26.6 1,009 (6.6) 1,951 4,068 4,998
Provision for taxes 353 259 36.2 357 (1.1) 710 1,383 1,699
PAT 589 485 21.5 652 (9.7) 1,241 2,685 3,299
Diluted EPS (INR) 1.9 1.7 11.3 2.1 (11.8) 4.0 8.7 10.7
Ratios (%)
NII/GII 42.3 37.6 41.2 41.7 41.0 41.3
Cost/income 60.3 60.0 57.2 58.7 59.3 59.3
Provisions / PPOP 24.3 26.2 26.0 25.2 23.8 21.8
Tax rate 37.5 34.8 35.4 36.4 34.0 34.0
Bal. sheet data (INR bn)
Advances 173,950 144,362 20.5 162,657 6.9 173,950 194,557 239,305
Deposits 205,671 176,846 16.3 191,548 7.4 205,671 226,006 275,540
Capital adequacy (%) 14.7 11.9 15.3 14.7 13.8 12.5
CD ratio (%) 84.6 81.6 84.9 84.6 86.1 86.8
Asset quality
Gross NPA 3,158 2,554 23.7 2,853 10.7 3,158 3,657 4,244
Gross NPA (%) 1.8 1.8 1.7 1.8 1.9 1.8
Net NPA 1,570 1,209 29.8 1,491 5.3 1,570 1,635 1,644
Net NPA (%) 0.9 0.8 0.9 0.9 0.8 0.7
Valuation metrics
B/V per share (INR) 84.5 95.3
Adj book value / share 80.8 91.5
Price/ Adj. book (x) 2.3 2.0
Price/ Earnings 21.1 17.1
Banking and Financial Services
6 Edelweiss Securities Limited
Q2FY18 earnings call highlights
With respect to guidance
Management aims to achieve growth rates in the range of 20-25%
o Management does not see the loan mix changing much going forward
Management aims to achieve C/I ratio and RoE of 55% and 14%, respectively, for exit
quarter of March 2019
o Management stated that RoA is not expected to worsen going ahead
While NIMs have been supported by CoF benefits and favourable re-financing, they
may fall going forward
o Management aims to maintain NIMs in the range of 370-375bps
Management is concerned about the new MCLR formula that may be
implemented by RBI
o Management aims to grow CASA deposits by atleast 20%
Aim is to double the balance sheet over the next 3-3.5 years
With respect to operations
New branch costs should slow down for the next 1-2 years, as expansion will be
limited to 10-12 branches / year
o Focus going forward will be on increasing the productivity of the branches
o Majority of the branches are full branches, with an average of 6-7 people per
branch
Q2FY18 saw some growth in corporate banking (got credit in AA and A segments;
market share gain from PSU banks)
o Aim is to restrict the proportion of corporate banking to 20% levels
o Every year, the bank adds around 20-25 customers; corporate banking ATS -
INR250-300mn
After exiting in 2009, the bank has been in CV business since the past 3 years
o CV business is restricted to small customers and should be 5% of book even in
future
While competition has increased in the mortgage and LAP segments, management is
confident in sustained growth
o This is on back of a strong distribution network and the fact that pricing is very fine
Other highlights
Contingent liabilities on taxes has come down from INR1bn to INR0.19bn
o During the quarter, interest on refund of income tax stood at INR72mn
Average ticket size – INR3-3.5mn
DCB Bank
7 Edelweiss Securities Limited
Q1FY18 earnings call highlights
With respect to growth
Operating environment is very dynamic shaped by Demonetisation, then farm loan
waivers, then BS-IV, RERA and then GST. While these are long term positive but in the
interim there will likely be some pressure (positively CEO has met with various
customers across various states and found no major challenge in the business model).
Credit growth in environment is not very good and thus huge completion is there, for
bank the decision are based on risk appetite. Thus pressure are percolating into NIMs
(during the quarter 8-10bps NIMs improvement was due to capital raised in April 2017).
In effect NIMs are starting to decline (expect pressure to percolate over next couple of
quarters). In terms of internal projection, business modeling is done at 370-375bps,
even at that NIMs level bank expects to maintain decent business growth. Aims to
maintain NIMs at 373-375bps.
On track o deliver on growth target set in Oct -2015. The target was to double book
from ~INR110bn in Oct-15 over next 32-36 months. The Focus will continue on retail,
SME and small-ticket products (secured) and bank suggestively indicates that corporate
book will not grow beyond 20%
Close to completing branch expansion plans ( accounted in October 2015), will
complete the target of 310 branches by 2017. Post that the target will be to put 10-15
branches per year for next couple of years.
Have a concept of “All product All branches”. Thus when branch is opened minimally
CA/ SA/TD/gold loan and one of CV or SME or Mortgages are offered. The bank
generally hire people from local areas and core team has expertise across region thus
no real pressure on moving into new geographic location.
80-90% of branches are on track of 18-22 months of break-even. Some branches has
not done well , few hicupps on the specific teams which bank has to redo it and bank is
catching up on that branches.
Bank is working on trade finance , insurance distribution and investment services
which has started to gain traction ( efforts are ) targeting 14-16% growth in the fee
income, focus on granular fee income profiles. PSLC is at the moment nit booked
under core fee income , this is generally back ended (as the amount is recognized later)
Stands on the earlier guidance of 55% cost income (exist quarter) of FY19 and 14% of
RoE.
With respect to asset quality:
While there has been some rise in the slippages in the mortgage segment, it is largely
transitional (some pressure on operating performance of businesses due to various
transitional challenge) and management suggest this to correct over period of time.
Farm loan waiver has impacted speed of recovery on BC-MFI business. 80% of AIB
business slippages this quarter will be related to MFI and farm loan waiver.
Floating provisions of INR440mn ( bank has never dipped into this pool, every quarter
bank make some floating provisions irrespective of the core operating performance).
There was no divergence with respect to asset quality ( based on FY16 RBI assessment).
No significant ARC sale during the quarter ( 1 account for INR20mn)
Corporate NPLs book now consist of 2-3 accounts.
Banking and Financial Services
8 Edelweiss Securities Limited
Other highlights
This quarter had benefit of treasury gains ( INR210mn from sale of HTM portfolio
transferred to AFS/HFT).
5% of the portfolio is related to MFI/PTC/BCs etc (have not grown this portfolio as bank
is relatively conservative on this portfolio). Expect personal loans to be 5% of portfolio
over next few years.
INR60-65lakh is the running cost for the branch,
Focus will continue to garner granular deposits (score cards are geared towards
branch performance on SA/ CA etc). Try to keep wholesale deposits at 20% levels.
70% of the loans have ticket size of INR30mn or less.
Excess SLR is around 2%
Employee base: 5258
SRs < INR700mn.
DCB Bank
9 Edelweiss Securities Limited
Company Description
DCB Bank is a modern emerging new generation private sector bank with 306 branches
across 19 states and 3 union territories. It is a scheduled commercial bank regulated by the
Reserve Bank of India. DCB Bank has contemporary technology and infrastructure including
state of the art internet banking for personal as well as business banking customers.
DCB Bank’s business segments are retail, micro-SMEs, SMEs, mid-Corporate, Agriculture,
commodities, government, PSUs, Indian banks, co-operative banks and Non- Banking
Finance Companies (NBFCs).
DCB Bank has deep roots in India since its inception in 1930s. Its promoter and promoter
group the Aga Khan Fund for Economic Development (AKFED) & Platinum Jubilee
Investments Ltd holds ~15% stake. AKFED is an international development enterprise. It is
dedicated to promoting entrepreneurship and building economically sound companies.
Investment Theme
While revenue traction has been softer than we would prefer, asset quality lends comfort.
Estimating >28% plus earnings CAGR over FY17-19 with operating leverage benefits, we
value DCB at 2.2x FY19E ABV for an RoE potential of 11-12%. This yields target price of
INR200. Monitorables are: 1) blip in productivity could mar revenue traction; b) adverse
impact of GST on MSME segment; and c) rising NPLs in the LAP segment.
Key Risks
Small balance sheet size renders it vulnerable to any lumpy slippages due to economic
downturn and may adversely affect bank profitability
Competition from existing players which are getting incrementally aggressive in retail
and new players when RBI issues licenses
The major risk that the bank is facing is human capital. With most of the core team
members sticking together through tough times, a unique concentration of employees
has been created. Also with new banking license there can be a huge demand for
human capital posing a risk for the bank.
10 Edelweiss Securities Limited
Banking and Financial Services
Financial Statements
Income statement (INR mn)
Year to March FY16 FY17 FY18E FY19E
Interest income 16,985 20,762 24,673 29,466
Interest expended 10,790 12,791 14,552 17,284
Net interest income 6,195 7,971 10,120 12,182
Non interest income 2,205 2,495 3,010 3,530
- Fee & forex income 1,550 1,760 2,110 2,530
- Misc. income 236 282 300 400
- Investment profits 419 452 600 600
Net revenue 8,400 10,466 13,131 15,712
Operating expense 4,909 6,283 7,792 9,317
- Employee exp 2,451 3,080 3,883 4,600
- Other opex 2,459 3,203 3,909 4,717
Preprovision profit 3,490 4,182 5,339 6,395
Provisions 879 1,115 1,271 1,397
Loan loss provisions 528 728 1,011 1,187
Investment depreciation 36 (1) 10 10
Other provisions 315 388 250 200
Profit Before Tax 2,611 3,067 4,068 4,998
Less: Provision for Tax 666 1,070 1,383 1,699
Profit After Tax 1,945 1,997 2,685 3,299
Shares o /s (mn) 284 285 307 307
Adj. Diluted EPS (INR) 6.8 7.0 8.7 10.7
Growth ratios (%)
Year to March FY16 FY17 FY18E FY19E
NII growth 21.9 28.7 27.0 20.4
Fees growth 22.2 13.6 19.9 19.9
Opex growth 23.8 28.0 24.0 19.6
PPOP growth 22.9 21.4 27.1 22.3
PPP growth 25.8 19.8 27.7 19.8
Provisions growth 26.5 26.8 14.0 9.9
Adjusted Profit 1.8 2.7 34.4 22.9
Operating ratios
Year to March FY16 FY17 FY18E FY19E
Yield on advances 11.6 11.5 11.1 10.9
Yield on investments 7.0 7.8 7.7 7.3
Yield on assets 10.0 10.1 9.9 9.8
Cost of funds 6.8 6.5 6.2 6.2
Net interest margins 3.7 3.9 4.1 4.1
Cost of deposits 7.3 6.9 6.4 6.3
Cost of borrowings 7.3 7.2 7.0 7.0
Spread 3.3 3.6 3.7 3.7
Cost-income 58.4 60.0 59.3 59.3
Tax rate 25.5 34.9 34.0 34.0
Key Assumptions
Year to March FY16 FY17 FY18E FY19E
Macro
GDP(Y-o-Y %) 7.9 6.6 6.8 7.4
Inflation (Avg) 4.9 4.5 4.0 4.5
Repo rate (exit rate) 6.8 6.3 5.8 5.8
USD/INR (Avg) 65.5 67.1 65.0 66.0
Sector
Credit growth 9.3 9.0 12.0 14.0
Deposit growth 8.6 14.0 12.0 13.0
CRR 4.0 4.0 4.0 4.0
SLR 20.8 20.0 20.0 20.0
G-sec yield 7.5 6.5 6.5 6.5
Company
Op. metric assump. (%)
Yield on advances 11.6 11.5 11.1 10.9
Yield on investments 7.0 7.8 7.7 7.3
Yield on asset 10.0 10.1 9.9 9.8
Cost of funds 6.8 6.5 6.2 6.2
Net interest margins 3.7 3.9 4.1 4.1
Cost of deposits 7.3 6.9 6.4 6.3
Cost of borrowings 7.3 7.2 7.0 7.0
Spread 3.3 3.6 3.7 3.7
Balance sheet assumption (%)
Credit growth 23.5 22.2 23.0 23.0
Deposit growth 18.4 29.2 17.2 21.9
SLR ratio 24.8 23.2 22.0 21.0
Low-cost deposits 23.4 24.3 25.3 25.9
Gross NPA ratio 1.5 1.6 1.9 1.8
Net NPA ratio 0.8 0.8 0.8 0.7
Net NPA / Equity 5.6 6.4 6.3 5.6
Capital adequacy 14.1 13.8 12.5 11.2
Incremental slippage 2.1 2.0 2.0 1.6
Provision coverage 50.6 51.1 55.3 61.3
11 Edelweiss Securities Limited
DCB Bank
Peer comparison valuation
Market cap Diluted P/E (X) Price/ Adj. BV (X) ROAE (%)
Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E
DCB Bank 871 21.1 17.1 2.3 2.0 11.8 11.9
Axis Bank 18,919 18.8 12.1 2.3 2.0 11.2 15.8
Federal Bank 3,771 21.7 17.4 2.1 1.9 10.6 10.9
HDFC Bank 73,467 26.9 22.3 4.7 4.0 18.2 19.0
ICICI Bank 27,023 14.7 10.7 2.3 2.0 11.9 14.9
IndusInd Bank 15,724 27.9 22.2 4.4 3.8 16.5 17.9
Karnataka Bank 909 8.7 7.2 0.9 0.8 9.6 10.8
South Indian Bank 892 14.3 7.8 1.4 1.2 8.6 14.5
Yes Bank 13,157 3.9 3.0 0.7 0.6 18.2 20.3
Median - 18.8 12.1 2.3 2.0 11.8 14.9
AVERAGE - 17.6 13.3 2.3 2.0 13.0 15.1
Source: Edelweiss research
RoE decomposition (%)
Year to March FY16 FY17 FY18E FY19E
Net int. income/assets 3.7 3.9 4.1 4.1
Fees/Assets 1.1 1.0 1.0 1.0
Invst. profits/Assets 0.2 0.2 0.2 0.2
Net revenues/assets 5.0 5.1 5.3 5.2
Operating expense/assets (2.9) (3.1) (3.1) (3.1)
Provisions/assets (0.5) (0.5) (0.5) (0.5)
Taxes/assets (0.4) (0.5) (0.6) (0.6)
Total costs/assets (3.8) (4.1) (4.2) (4.1)
ROA 1.2 1.0 1.1 1.1
Equity/assets 9.7 9.0 9.1 9.2
ROAE (%) 11.9 10.8 11.8 11.9
Valuation parameters
Year to March FY16 FY17 FY18E FY19E
Adj. Diluted EPS (INR) 6.8 7.0 8.7 10.7
Y-o-Y growth (%) 0.9 2.3 24.9 22.9
BV per share (INR) 61.2 68.3 84.5 95.3
Adj. BV per share (INR) 58.8 65.2 80.8 91.5
Diluted P/E (x) 26.9 26.3 21.1 17.1
Price/ Adj. BV (x) 3.1 2.8 2.3 2.0
Balance sheet (INR mn)
As on 31st March FY16 FY17 FY18E FY19E
Share capital 2,844 2,854 3,071 3,071
Reserves & Surplus 14,575 16,630 22,885 26,184
Net worth 17,420 19,484 25,957 29,256
Deposits 149,260 192,892 226,006 275,540
Total Borrowings 11,479 12,758 17,664 22,772
Other liabilities 12,762 13,006 8,536 10,450
Total liabilities 190,921 238,140 278,162 338,017
Loans 129,214 158,176 194,557 239,305
Cash and Equivalents 8,916 11,925 9,724 11,873
Gilts 39,855 47,711 53,607 62,645
Others 3,479 10,468 12,854 15,789
Fixed assets 1,978 2,321 2,140 1,941
Other Assets 7,480 7,539 5,280 6,464
Total assets 190,921 238,140 278,162 338,017
Credit growth 23.5 22.2 23.0 23.0
Deposit growth 18.4 29.2 17.2 21.9
EA growth 15.9 25.8 18.6 21.7
SLR ratio 24.8 23.2 22.0 21.0
C-D ratio 86.9 82.2 86.3 87.0
Low-cost deposits 23.4 24.3 25.3 25.9
Provision coverage 50.6 51.1 55.3 61.3
Gross NPA ratio 1.5 1.6 1.9 1.8
Net NPA ratio 0.8 0.8 0.8 0.7
Incremental slippage 2.1 2.0 2.0 1.6
Net NPA / Equity 5.6 6.4 6.3 5.6
Capital adequacy 14.1 13.8 12.5 11.2
- Tier 1 12.8 11.9 10.6 9.3
12 Edelweiss Securities Limited
Banking and Financial Services
Holding - Top 10
Perc. Holding Perc. Holding
Matthews International Capital Management 4.77 Tano Mauritius India FVCI 4.27
Sundaram Asset Management 3.46 Prazim Trading & Investment 2.90
DSP BlackRock Investment Manager 2.64 Birla Sun Life Asset Management 2.60
PI Opportunities Fund I 2.57 Dimensional Fund Advisors 2.39
WCP Holdings III 1.94 Tata Asset Management 1.67
*as per last available data
Insider Trades
Reporting Data Acquired / Seller B/S Qty Traded
20 Mar 2017 Praveen Kutty Sell 73000.00
14 Mar 2017 Praveen Kutty Sell 30000.00
02 Mar 2017 Mr. Bharat Laxmidas Sampat Sell 52000.00
28 Feb 2017 Mr. Bharat Laxmidas Sampat Sell 52000.00
27 Feb 2017 Mr. Bharat Laxmidas Sampat Sell 52000.00
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
20 Mar 2017 Prazim Trading & Investment Company Pvt Ltd Buy 7912355 162.35
20 Mar 2017 Pi Opportunities Fund I Sell 7912355 162.35
*in last one year
Additional Data
Directors Data Nasser Munjee Chairman Murali M. Natrajan Managing Director & CEO
Altaf Jiwani Director Amin Manekia Director
Imran Contractor Director Iqbal Ishaq Khan Director
Chakrapany Narasimhan Director Nalin Shah Director
S. Sridhar Director Jamal Pradhan Director
Shaffiq Dharamshi Director Rupa Devi Singh Director
Auditors - Deloitte Haskins & Sells
*as per last annual report
13 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Allahabad Bank HOLD SU M Axis Bank BUY SO M
Bajaj Finserv HOLD SP L Bank of Baroda BUY SP M
Bharat Financial Inclusion BUY SO M Capital First BUY SO M
DCB Bank HOLD SU M Dewan Housing Finance BUY SO M
Equitas Holdings Ltd. BUY SO M Federal Bank BUY SP L
HDFC HOLD SP L HDFC Bank BUY SO L
ICICI Bank BUY SO L IDFC Bank HOLD SP L
Indiabulls Housing Finance BUY SO M IndusInd Bank BUY SP L
Karnataka Bank BUY SP M Kotak Mahindra Bank HOLD SP M
L&T FINANCE HOLDINGS LTD BUY SO M LIC Housing Finance BUY SP M
Magma Fincorp BUY SP M Mahindra & Mahindra Financial Services HOLD SU M
Manappuram General Finance BUY SO H Max Financial Services BUY SO L
Multi Commodity Exchange of India BUY SP M Muthoot Finance BUY SO M
Oriental Bank Of Commerce HOLD SP L Power Finance Corp BUY SO M
Punjab National Bank BUY SP M Reliance Capital BUY SP M
Repco Home Finance BUY SO M Rural Electrification Corporation BUY SO M
Shriram City Union Finance BUY SO M Shriram Transport Finance BUY SO L
South Indian Bank BUY SP M State Bank of India BUY SP L
Union Bank Of India HOLD SP M Yes Bank BUY SO M
RATING & INTERPRETATION
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
14 Edelweiss Securities Limited
Banking and Financial Services
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91-22) 4009 4400, Email: [email protected]
Aditya Narain
Head of Research
Coverage group(s) of stocks by primary analyst(s): Banking and Financial Services
Allahabad Bank, Axis Bank, Bharat Financial Inclusion, Bajaj Finserv, Bank of Baroda, Capital First, DCB Bank, Dewan Housing Finance, Equitas Holdings Ltd., Federal Bank, HDFC, HDFC Bank, ICICI Bank, IDFC Bank, Indiabulls Housing Finance, IndusInd Bank, Karnataka Bank, Kotak Mahindra Bank, LIC Housing Finance, L&T FINANCE HOLDINGS LTD, Max Financial Services, Multi Commodity Exchange of India, Manappuram General Finance, Magma Fincorp, Mahindra & Mahindra Financial Services, Muthoot Finance, Oriental Bank Of Commerce, Punjab National Bank, Power Finance Corp, Reliance Capital, Rural Electrification Corporation, Repco Home Finance, State Bank of India, Shriram City Union Finance, Shriram Transport Finance, South Indian Bank, Union Bank Of India, Yes Bank
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 161 67 11 240 * 1stocks under review
Market Cap (INR) 156 62 11
Date Company Title Price (INR) Recos
Recent Research
17-Oct-17 Bajaj Finserv Stellar show; fairly valued; Result Update
5,354 Hold
16-Oct-17 Dewan Housing Finance
Sharp uptick in growth; stable NIMs and asset quality; Result Update
558 Buy
16-Oct-17 Federal Bank
Growth momentum sustains; stress normalises as guided; Result Update
125 Buy
> 50bn Between 10bn and 50 bn < 10bn
Buy Hold Reduce Total
Rating Interpretation
Buy appreciate more than 15% over a 12-month period
Hold appreciate up to 15% over a 12-month period
Reduce depreciate more than 5% over a 12-month period
Rating Expected to
-
149
297
446
594
743
Jan
-14
Feb
-14
Mar
-14
Ap
r-1
4
May
-14
Jun
-14
Jul-
14
Au
g-1
4
Sep
-14
Oct
-14
No
v-1
4
De
c-1
4
(IN
R)
One year price chart
100
125
150
175
200
225
Oct
-16
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
(IN
R)
DCB Bank
15 Edelweiss Securities Limited
DCB Bank
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16 Edelweiss Securities Limited
Banking and Financial Services
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17 Edelweiss Securities Limited
DCB Bank
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