Maintain Buy on Yes Bank - Motilal Oswal

YES BANK: Mgmt meet update; Concerns on exposure to MFI and Telecom overdone; Guides for 2x industry growth; Buy

- Concerns over MFI and telecom exposure are overdone (e.g. exposure to MFI is less than 1% of loans).

- Faster repricing of loans and higher system incremental CD ratio will help to maintain spreads despite rise in wholesale borrowing cost (80% of liabilities).

- Branch expansion has picked up; opened 14 branches in 3Q and branch network is increased to 185 till date. Planning to scale up to 250 branches by 1QFY12.

- Guidance of 2x of the industry growth intact. Return ratios are likely to remain superior with RoA of ~1.5% and RoE of 20%+.

- Strong growth, proven execution capabilities, diversified fee income and superior return ratios will ensure premium valuations. Over FY05-10, the average one-year forward P/BV multiple has been 2.6x and the average one-year forward P/E has been 17x.While Yes Bank is trading at 15% discount to average multiples, peers (HDFC Bank, Axis Bank and ICICI) are trading at a flat to 10% premium to their 5-yr av multiples. Maintain Buy with target price of Rs405 (3x FY12 BV).

Source : Equity Bulls

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