SNAPSHOT
NSE CODE: DHANBANK
BSE CODE: 532180
CMP: 107.70
52 WEEK HIGH/LOW: 212.20 / 94.00
MCAP: 918.8 Cr.
PE: 44.79
INDUSTRY PE: 27.39
EPS (TTM): 2.41
FV: 10.00
BV: 96.43
P/BV: 1.12
DIVEDEND (%): 10.00%
OVER VIEW
Dhanlaxmi Bank was incorporated on 14th November 1927 at Kerala by a group of highly skilled and self motivated entrepreneurs, Dhanlaxmi Bank Ltd. started business with Rs. 11,000 as capital and seven employees and Today, more than 4,500 people work with this bank to serve close to 1.5 Million customer base of the bank. It became a Scheduled Commercial Bank in 1977, and in 2009, was awarded approvals by the Reserve Bank of India for opening 66 branches. In the competitive age, the bank has also set up a state of the art data center in Bangalore, to keep the network system operational 24×7. Today, Dhanlaxmi Bank has a wide network of 275 branches and close to 450 ATM’s across India. It has footprint in 14 states and 137 cities in India.
INVESTMENT THESIS
Good track record:– The Company’s Q3 net profit was up at Rs 7.3 crore versus Rs 1.3 crore, year-on-year. For 9 months of FY11, bank’s PAT was Rs. 14.9 crore, leading to EPS of Rs. 1.75 on the expanded equity. Of this, Q3 alone accounted for PAT of Rs. 7.3 crore and EPS of paisa 85. Its NII was up at Rs 74 crore versus Rs 39 crore, YoY. Total income for FY11 is expected to be better than FY10. First 9 Month of FY11, Total income for the bank stands @ 616 Cr compare with 711 cr of FY10.
Strong Growth to continue:– Dhanlaxmi Bank did very well in last few quarters. In FY10, It shown high credit growth with support of big investment in FY10. Company aggressive initiative to make it Pan India bank, Further expansion on SME loans, Add-on more products in competitive age and de-risking the asset book will help bank to perform better in time to come. Bank’s Advance and various Deposit grew sharply and one of the best in industry in FY10. It is expected to do well in FY11-12 also on the back of expansion of its branch in FY10. Bank also has tie-up with some major MF, Insurance and broking houses which will help in overall income in years to come. Bank is also expecting 16% return of equity by the year of 2013.
Further Expansion:– Recently, Dhanlaxmi Bank has lifted Rs 380 crore through its QIP at Rs 181.30 Rs. / Share to expand its business. In FY10, Company did big investment. In FY11, company is planning 50% further expansion to Rs. 18,000 Crore. Expansion in Higher yielding retail and SME loans will help NIMs to move upward. It also has planned to increase the no. of branch in FY11 which will help bank to improve its Bank Deposit and Credit deposit.
Valuation:– At CMP of 107 Rs. stock is trading close to its BV of 96.43. P/BV stands @ 1.12. It is trading at very attractive valuation if ones compare with other small private banks. High Growth across the segment and further expansion will help bank to reach P/BV of 1.6 in future. One can BUY at Current market price of 107 till 93 with a target multiple of 1.6x and a target price of 154+ in 12-15 Months with an upside potential of more than 50%.
Regards – EquityAhead Research!!
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