AnandRathi research report on Yes BankWe downgrade Yes Bank from a Buy to a Sell. We also cut our price target to `675 as we build in higher sustainable credit costs, which would lead to lower RoEs. The bank has a large corporate bond portfolio, which could be exposed to default risks in a volatile economic environment. High exposure to iron & steel, EPC players and CRE could lead to greater impairment. The stock appears highly valued at 2.1x FY17e ABV compared to other private corporate lenders. Its credit cost is one of the lowest in the industry and would likely move up, given the weak macro environment, coupled with greater exposure in stressed sectors. We expect a sustainable RoA of 1.4%, lower than that of 1.64% in FY15. The RoE would continue under pressure, given the frequentdilution expected, coupled with lower earnings. We expect a 13% earnings CAGR over FY15-18, lower than the 29% CAGR over FY11-15. We value the bank at 1.85x FY17e P/ABV. Risks. Sharp recovery in the macro environment; less-than-expected slippages.For all recommendations, click here 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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