Kotak Institutional Equities has maintained its sell rating on Yes Bank and estimates the stock’s fair value at Rs 14, valuing the bank at ~1.1X book value. “We keenly await a better entry point as the valuation re-rating argument to attract investors is not yet compelling,” it said.
The brokerage, however, said Yes Bank is well underway to script a remarkable turnaround that few would have expected.
“The bank is showing good traction but building a strong, granular and retail-driven deposit franchise is time-consuming and expensive, especially at a time when growth is recovering for all players. RoE recovery would need more time. The bank has to see further NIM expansion at the same time,” Kotak said.
, which described Q2 as yet another strong operating quarter for the lender, also acknowledged that Yes Bank is on the right track.
“However, the bank currently trades at 1.1x FY24E BVPS which we believe adequately captures the positives. We rate Yes Bank as HOLD with a target price of Rs 16, valuing the bank at 1.1x FY24E BVPS,” it said.
During the weekend, the bank’s net profit for the September quarter slid 32% YoY to Rs 152.82 crore but recorded a 32% YoY increase in the net interest income (NIIs) to Rs 1,991 crore.
pointed out that the miss in earnings was primarily due to higher than anticipated credit cost at 1.1%, accelerated by ageing-related provision and a step up in provision on securities receipts.
“We see a turnaround in relevant operating metrics and improved confidence in the stability of the franchise. Nonetheless, we remain cognisant of the risks arising from the delay in resolution of the stress pool, net labelled exposure of 4.3%, modest RoE profile during transition and supply overhang post the expiry of lock-in shares,” the brokerage said.
Assigning 1.2x FY24E ABV to the stock, ICICI Securities has a hold rating with an unchanged target price of Rs 15.7.
The stock, which has gained nearly 30% from its 52-week low, was trading 1% lower at Rs 15.60 on Tuesday. Trendlyne data shows that out of 12 analysts covering the stock, none have a buy rating.
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