CMP: Rs153 Target Price: Rs150
Yes Bank reported net profit of Rs1.0bn for Q1FY09, inline with our estimates. The strong growth in net profit was driven by NII growth of 44.9% and higher other income. NII growth was driven by 26% yoy growth in advances (2.2% qoq).
However, we see three negatives in the results: (1) sequentially flat NIMs at 3.1% as the bank improved proportion of retail deposits – we believe that NIMs would remain between 2.9-3.0% with shorter tenure of both advances and deposits (2) high provision charge despite lower gross NPAs and (3) large treasury gains.
We are revising our price target to Rs150 (from Rs90) earlier as we roll over the P/ABV multiple to FY11. At the current market price, the stock is quoting at 2.4x FY11E ABV and 2.1x FY11E ABV. We are changing our recommendation from BUY to HOLD.
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