Yes Bank, BUY
Splendid operating performance
Price Rs165 Target Price Rs260
Yes Bank reported strong set of numbers for 4QFY08, partially allaying the concerns on its exposure to Forex derivatives. The bank has reported Rs645mn of net profit for Q4 FY08, far ahead of our expectations of Rs558mn. The robust performance has been driven by strong growth in net interest income (supported by higher NIM’s for the quarter) and moderate growth in the operating cost. The share of non interest income to total income continues to remain strong at 50%. As a result the operating profit has grown by 102.4% yoy to Rs1209mn.
Albeit, the bank has not seen any delinquencies yet in its Forex derivatives portfolio, as a matter of prudence it has used robust profitability of the quarter to provide Rs190mn for special contingencies.
We continue to remain upbeat on Yes Bank’s business model of knowledge expertise and consequent robust balance between fund and non-fund based income. At the current valuations, the stock is quoting at 10x FY10E EPS and 2.1x FY10E ABV. We maintain our BUY Rating on the stock with price target of Rs260.
Strong NII growth comes as a surprise
Yes Bank’s NII has grown by 134.3% yoy for Q4FY08 to Rs1084mn, ahead of our expectations. The strong performance has been driven by improved margins .
MK,
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