Moneycontrol Bureau
Most analysts are enthuastic about YES Bank post its January-March quarter results and have increased target price on it. Shares of the private lend touched record high at Rs Rs 947.75, rising over 3 percent intraday on Thursday.
Macquarie has an outperform rating as YES Bank is its top picks in the sector. It has raised target price to Rs 1130 and earnings per share (EPS) estimates are raised by a minor 1-2 percent for FY17-18. Over the medium term, management expects high accretion of the retail business to overall profitability levels, it adds.
JP Morgan has an overweight rating on the stock with a target of Rs 925 per share stating that valuations are still reasonable despite the stock being up 25 percent year-to-date.
It feels that YES Bank's business and earnings mix continues to improve – the Current Account, Savings Account (CASA) momentum continues unabated, the corporate book moved up the quality curve and fees are getting more granular. CASA deposits grew 16 percent QoQ, pushing the CASA ratio to 28 percent while the management continues to aspire for 300-500 bps annual improvement for the next five years. JP Morgan thinks the asset quality outlook is stable and are expects 50 bps for F17-F18.
Morgan Stanley also has an overweight rating with a target price of Rs 1050 per piece. The brokerage firm likes YES Bank given its attractive long-term growth potential, improving liability franchise and relatively much better asset quality performance. According to its estimates, YES Bank may see 23 percent EPS CAGR over the next two years driven by strong loan growth, some margin expansion and stable credit costs.
"While improving CASA ratio and potentially lower saving account rates will support margins, key to watch would be potential impact of Marginal Cost of Funds based Lending Rate (MCLR) lending rate mechanism as a greater proportion of loan book transitions to this methodology over the next two to four quarters," Morgan Stanley says in a report.
Nomura has a buy rating on the stock with a target price of Rs 1125 percent, indicating over 20 percent upside. It says that management guidance of FY17 credit costs indicates a marginal tick-up in credit costs, but 70-75 basis points (bps) in the current environment will be positive. It has reduced credit costs expectation to 70-80bps in FY17.
Bank of America Merill Lynch has also reiterated buy rating with a target price of Rs 1200. It has raised FY17-18 earnings per share (EPS) estimates by 3-4 percent driven by growth, rising margins and fees. It feels that YES Bank’s ability to structure credits, go solo in most cases and assess risk profile better is holding them in ‘good stead’ through the current long credit cycle in India.
CLSA also maintains buy rating and raised target to Rs 1100 from Rs 910. The brokerage firm has raised earnings forecasts by 5-6 percent to factor healthy growth and stable asset quality and see a 21 percent CAGR over FY16-18. The bank may also look to raise capital to support growth plans, it adds.
"Asset-quality pressures were higher, but the stress loan ratio remains low at 1.5 percent of total and details on credit profiles were stable. Moreover, the scale-up of the deposit franchise will support market-share gains in the corporate refinancing segment; the bank is also investing in a retail lending platform," it adds in a report.
However, Goldman Sachs is neutral on the stock and increased target price by 8 percent to Rs 970 per share.
The private lender’s Q4FY16 earnings grew 27 percent (YoY) driven by higher-than-expected revenue growth but partially offset by higher operating expenses and loan provisions. Slippages moved higher to 2 percent of loans on sequential basis.
At 11:58 hrs Yes Bank was quoting at Rs 939.75, up Rs 24.15, or 2.64 percent on the BSE.
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