>DEVELOPMENT CREDIT BANK: Q4FY12 Results

DCB’s Q4FY12 profit at | 17.3 crore (grew 52% YoY, 11% QoQ) was 9% above our estimates mainly due to lower provisioning expenses (down by 18% YoY) and higher-than-expected loan growth of 24% YoY to | 5284 crore. However, NII at | 57 crore declined 4% QoQ owing to a 25 bps sequential fall in NIM. Stable yield and a 41 bps rise in cost of funds led to a decline in NIM during the quarter. The bank raised | 94 crore through QIP and | 98.75 crore through preferential allotment, which resulted into Tier 1 capital rising to 13.8% from 11.2% in Q3FY12. Total CAR stands at 15.4% as on Q4FY12.


We have revised business growth higher to 22% in FY13E from 17% earlier and expect PAT to grow at 29% CAGR over FY12-14E.


■  Credit growth surprises positively
After plunging sharply from 23.5% YoY growth in FY11 to 8.9% YoY growth in Q3FY12, advances increased by | 978 crore to | 5284 crore in Q4FY12 recording growth of 24% YoY. Meeting the priority sector target was the major reason for such a sharp rise in loans during Q4FY12. The agricultural loan book rose strongly by 92% QoQ to | 801 crore. The corporate book also witnessed healthy 34% QoQ growth to | 1194 crore. However, the retail portfolio grew by a moderate 8% QoQ to | 1853 crore. We are revising our FY13E credit growth target from 20% to 22%.

■  Asset quality improves sharply

Asset quality witnessed a sharp improvement with absolute GNPA declining by | 14.6 crore sequentially to | 242 crore and NNPA declining by | 14.1 crore to | 30 crore. The NNPA ratio at 0.6% was the lowest in the last few quarters. The provision coverage ratio stands at 91% as against 87% in Q3FY12 and Q4FY11.


Valuation
At the CMP of | 50, the stock is trading at 1.3x its FY14E ABV. With an improvement in loan growth and asset quality and margins of ~3.0-3.1%, we expect NII and profit to grow at 22% and 29% CAGR to | 342 crore and | 93 crore, respectively, over FY12-14E. We maintain our target price of | 60 (1.6x FY14E ABV) from a 12-15 months perspective.


To read report in detail: DCB
RISH TRADER