DCB Bank shares jump 7%; expert says management has 'HDFC Bank-like pedigree'

Shares of DCB Bank Ltd rose sharply on Wednesday, settling 7.48 per cent higher at Rs 187.45. Ashish Kila, Director at Perfect Group and CIO of Perfect Wealth, believes the private lender's stock looks attractive even at current levels, citing earnings growth and strong management pedigree.

"It's available below book value. Still, they have compounded profits at 25–30 per cent. RoE (return on equity) is close to 13–15 per cent. This is a bank which has a market capitalisation (m-cap) of Rs 6,000 crore, and the pedigree of the management is gold standard. I would not rank it any less than HDFC Bank in terms of pedigree. I see a long runway for this company to serve the MSME sector and keep growing," Kila told Business Today.

He highlighted the lender's consistent performance track record. "We have been tracking this company for more than 10 years, and it has never surprised us in terms of losses or any unexpected policy changes or anything else. They have performed well and would continue to perform in the space. So again, all good positive indicators for this," Kila added.

Kila also noted that while the bank's earnings have grown steadily, the stock price has lagged over the years. "In the last 10–15 years, the bank has not given much returns in terms of pricing. The price-to-book has corrected. So, from highs of two-and-a-half or three times, it is now below book value. All this while, earnings have compounded, and the book has grown. We still think the lender deserves much higher valuations than below book," he said.

"Below book valuation is for banks which don't perform well or for those where we doubt our asset quality. I think there is no doubt on asset quality here," Kila concluded.

From a technical perspective, AR Ramachandran, a Sebi-registered research analyst at Tips2trades, said DCB Bank's stock remains bullish on daily charts.

"DCB Bank's stock price is bullish on daily charts with strong support at Rs 167.5. A daily close above the resistance of Rs 193 could lead to an upside target of Rs 204 in the near term," he stated.