Dear All,
Forwarding you the Result Update on Dena Bank for 4QFY2011 with a Buy recommendation and a Target Price of Rs.121 (12 months)
For 4QFY2011, Dena Bank reported moderate net profit growth of 14.5% yoy and a marginal 1.2% qoq to `157cr, in line with our estimates of `156cr. However other income growth was stronger than estimated which was offset by higher provisioning costs. We recommend a Buy rating on the stock.
Above industry business growth, but with higher slippages and lower NIMs: On a sequential as well as yoy basis, advances and deposits grew ahead of industry at 8.2% (26.4% yoy) and 6.2% (25.1% yoy), respectively. CASA deposits registered a strong 23.2% yoy growth. The CASA ratio remained stable at 35.4% sequentially. Notwithstanding stable CASA ratio and moderate increase in CD ratio, due to the higher cost of deposits qoq, the reported NIM declined by 18bp sequentially to 3.09%. Consequently, NII grew by marginal 1.0% qoq to `471cr. Sequential Non-interest income growth was stronger at 42.3% on account of higher recoveries and fee income. Gross NPA and Net NPA ratios remained stable at 1.9% and 1.2%, respectively. Slippages witnessed sharp increase during the quarter, with a slippage rate of 3.0% in 4QFY2011 compared to 1.2% in 3QFY2011 and 2.2% in FY2010.
Outlook and valuation: Dena Bank, with a strong CASA ratio of 35.4%, is better placed than peers to protect its NIM in a rising interest rate environment. After the equity capital infusion of about `540cr by the government, the bank's tier-I ratio has improved to 9.8%. At the CMP, the stock is trading at 4.8x FY2013E EPS of `21.3 and 0.7x FY2013E ABV of `138. We recommend a Buy rating on the stock with a Target Price of `121. We have assigned a target multiple of 0.9x FY2013E ABV, translating into a 18.8% upside from current levels.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600 Ext: 6864 ,6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,5th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600, Ext: 6864, 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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