Buy Yes Bank; target of Rs 480: PLilladher

Prabhudas Lilladher is bullish on Yes Bank and has recommended buy rating on the stock with a target of Rs 480 in its October 23, 2012 research report.

“Yes Bank reported a beat in PAT with strong all-round performance on most operating metrics and most importantly, big surprise on asset quality. Yes Bank’s partial recovery and relatively lower write-offs on Deccan Chronicle adds significant credibility to their credit underwriting. With strong operating metrics, stable asset quality and best in class ROEs, Yes Bank remains our top pick and we increase our Sep-13 PT to Rs480/share (rollover) implying a reasonable ~11.5x FY14 EPS.”

“Yes Bank delivered ~10% QoQ growth in customer assets, implying ~33% YoY growth, though management highlighted that they remain cautious and growth trends may not sustain. Fee income growth was also robust at ~30% YoY growth with most fee income streams delivering high growth, except financial markets. We expect a modest ~22% AUM growth in FY13 and we see limited risk to our assumptions. Margins inched up by 10bps QoQ after remaining flat for seven quarters as wholesale rates have eased off and this benefit is likely to play out fully over H2FY13. Liability franchise build up surprised with ~Rs8.8bn of SA accretion in Q2FY13 and CASA now stands at 17.3% v/s 11% pre SA-deg (Sep-11)."

"We factor in ~20bps of NIM expansion over FY12-14 and we see scope for positive surprise on margins. Yes has been able to hold on to ROEs of +20% over the last five years despite lower dependence on fees/assets (from >2% of assets to <1.5% of assets). Also, SA de-reg has aided Yes Bank in addressing investor concerns on liability franchise and with stable asset quality, we believe rerating catalysts are well in place. We rollover to Mar-14 book and increase our PT to Rs480/share implying 11.5x FY14 earnings,” says Prabhudas Lilladher research report.   

Non-Institutions holding more than 90% in Indian cos

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