Motilal Oswal's research report on Yes Bank
We believe the mid-size private banks are likely to be the key beneficiaries of demonetization and the digitalization drive of the Government of India (GoI). With significant investments in people (18,530 v/s 3,929 in FY11), branches (950 v/s 214 in FY11) and new products, Yes Bank (YES) is well poised to capitalize on this opportunity to fast track achievement of its stated objective on CASA, retail roll-out and loan CAGR.
Outlook
Earnings CAGR is expected to be robust at 26% (without factoring in capital raise), driven by NIM expansion (easy liquidity and low interest rate are significant enablers) and strong loan growth. YES, our top pick, was the best-performing stock in CY16 with a return of 65%. With a favorable environment, healthy capitalization, expected improvement in return ratios and a structural shift in the balance sheet profile, we expect outperformance to continue. Based on residual income model, we raise our price target to INR 1,500 (2.7x FY19 BV) and maintain our Buy rating.
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