Buy Yes Bank; target Rs 480: Dolat Capital

Dolat Capital's report on Yes Bank

"Yes Bank showed a strong Q1 performance with 38 percent YoY rise in net profit to Rs 4 bn, driven by 40 percent NII growth and a 53 percent jump in non-interest income. Adjusting the one-offs; profit on sale of government securities of Rs 950mn and expenses on foreign currency borrowing, net profit growth would still have been 20 percent +. The bond gains were also in part utilized for adding to the contingency provisions which now stand at 1 percent of the loan book. However, further to the recent RBI measures, we have been revisiting our growth and profitability assumptions for banks under our coverage. We believe the measures announced by the RBI could extend longer than the current expectations, and therefore impact earnings trajectory. Hence we are downgrading our earnings growth CAGR of 25 percent over the next two years to 19 percent. We are also reducing our target price to Rs 480 based on PBR of 2.5x on FY14 BVPS (as against PBR of 3x earlier), and taking it out of our preferred picks. We believe that while there can be value from a one year perspective, the short term pressures/ uncertainties can prevent an immediate sharp re-rating. Maintain Buy rating on the stock," says Dolat Capital research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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