Small-cap private lender Dhanlaxmi Bank expected to give good returns, says analyst: Check Q2 expectations, share price history

Small Cap Stock: Small-cap private lender: Dhanlaxmi Bank may join the party of reporting stellar second-quarter numbers for the financial year 2022-23 (Q2FY23), according to Zee Business senior research analyst Kushal Gupta. The bank is scheduled to report its July-September quarter results on November 9.

Gupta believes, Dhanlaxmi Bank may report its highest-ever net interest income (NII) and is likely to report improved asset quality for the fifth straight quarter in Q2. He took cues from robust South Indian Bank results to estimate strong numbers of Dhanlaxmi Bank as both banks cater to the Kerala region.

The research analyst said Dhanlaxmi Bank too is expected to report strong earnings as that of small-cap private lender South Indian Bank, which released its Q2 numbers on October 20. He added that both banks are Kerala-focused corporate (banks) that have similarities in their operations.

On the back of strong earnings, shares of Dhanlaxmi Bank are likely to move northwards, giving investors an opportunity for good returns, according to a Zee Business research report.

Dhanlaxmi Bank Q2 Expectations

Dhanlaxmi Bank may report 37 per cent year-on-year (YoY) growth in net interest income (NII) to Rs 125 crore. Similarly, South Indian Bank too had reported a YoY growth of 34-35 per cent in their NII.  

Moreover, Dhanlaxmi Bank’s provisioning may fall by 20 per cent YoY to Rs 18 crore in Q2, which will eventually improve the asset quality of the bank — the same was seen in South Indian Bank as well.

Gupta expects the gross NPA (non-performing assets) to improve by 100 basis points to 5.35 per cent from 6.36 per cent sequentially, and Net NPA to come down to 2 per cent from 2.69 per cent QoQ.

Dhanlaxmi Bank’s gold loan portfolio is also expected to show good growth like that of South Indian Bank, Gupta said. He added that as per books around 58 per cent of advances of Dhanlaxmi Bank are from Kerala and South Indian Bank has 41 per cent of advances from the same region.

Amid higher NII and improved asset quality, Dhanlaxmi Bank’s profit is seen rising nearly 10-fold to Rs 38 crore in Q2FY23 from Rs 3.7 crore in Q2FY22, the research analyst added.

Dhanlaxmi Bank Share Price History

Shares of Dhanlaxmi Bank closed nearly 16 per cent higher to Rs 15.6 per share on Monday, after hitting a 52-week high of Rs 15.95 per share on the NSE. The stock has been rising in the last five sessions and it has jumped almost 30 per cent during this period.

The Dhanlaxmi Bank stock has been flat with negative bias in the last one year, whereas it has registered a marginal growth of 4 per cent year-to-date. In comparison, Nifty has reported a surge of around 1 per cent in the last one year and over 3 per cent rise in YTD.