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Yes Bank Stock Research Report

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Company Overview:

 

 

YES BANK has been recognized amongst the Top and Fastest Growing Banks in various Indian Banking League Tables by prestigious media houses and Global Advisory Firms, and has received several national and international honours for our various Businesses including Corporate Investment Banking, Treasury, Transaction Banking, and Sustainable practices through Responsible Banking. YES BANK is steadily evolving as the Professionals’ Bank of India with the long term mission of “Building the Finest Quality Bank of the World in India” by 2020.

Key points

Strong NII, declining COFs help profits:

Yes Bank posted strong results for Q3FY2017 with a strong net interest income (NII) growth as well maintaining the asset quality. The NII for Q3FY2017 increased by 30.3% year on year (YoY) to Rs1,507.5crore on the back of strong advances and growth in the current and savings account (CASA). The net interest margin (NIM) expanded to 3.5% (up 10 basis points [BPS] from Q2FY2017). NIMs expansion was mainly due to the cost of funds (CoF) coming down due to softening interest rates and a rise in CASA deposits. While the treasury profit helped the Other income grow by 33.8% YoY to Rs998.3 crore, the bank is steadily building its fee income stream.

 Strong growth traction continues:

Yes Bank saw strong growth traction as its advances grew smartly by 38.7% YoY to Rs117,087 crore with Corporate Banking (which accounts for 68.9% of the advances) was up 42% YoY and Retail & Business banking business (including micro, small & medium enterprises [MSME]; forming 31.1% of the advances) was by 32% YoY. Deposits grew by 30.5% YoY to Rs132,375.8crore.

 

Performance highlights:.

The performance on CASA deposits front was robust (CASA ratio up 300BPS from Q2 to 33.3%), helped partly by the demonetisation drive but also indicating the improvement in retail segment. Both SA deposits (Rs29,348crore) and CA deposits (Rs14,778 crore) grew by 13% and 14% respectively since Q2FY2017. The management has indicated that amongst the small and medium enterprises (SME) clients, most are adopting the formal banking channel which is positive for the long term.

Brand Pillars:

The YES BANK brand is built around key Brand Pillars, which epitomize the growing strengths of the Bank. All communication and advertising has been created around these key brand pillars.

  • Growth: YES BANK's core promise is growth for its internal and external stakeholders symbolized in ‘Say YES to Growth!’
  • Trust: YES BANK's Promoters, Investors, and Top Management team are all of the highest pedigree with a demonstrated track record, thus inspiring and establishing a Trust Mark – ‘Say YES to Trust!’
  • Innovation & Technology: YES BANK is establishing the highest standards in customer service by adopting cutting-edge, innovative Technology. The only thing constant about technology used at YES BANK is Evolution.

Valuation :

 

Particulars

FY 15

FY 16

FY17E

Net Interest Income(cr)

3487.8

4566.7

5459.1

Net Profit

2005.4

2539.4

3133.2

EPS

48.7

60.4

74.5

EPS Growth (%)

8.57

23.98

23.38

PE (X)

21.8

17.6

14.2

Book Value

283.0

327.0

386.1

P/BV

3.7

3.2

2.7

RoE (%)

21.3

19.9

20.9

RoA (%)

1.6

1.7

1.8

 

Highlights the fact:

1)Yes Bank, by virtue of its size (and thereby avoiding large-ticket problem loans), and business mix has been able to perform better than peers.

2)Yes Bank has consciously decided to pursue balance sheet growth via customer assets (advances plus credit substitutes).

3)Yes Bank’s asset quality has been good with the gross non-performing advances (GNPA) stable at 0.85% and net non-performing advances (NNPA) also stable at 0.29% as compared with Q2 and credit cost at only 8BPS for Q3FY2017.

4)Faster deposit repricing compared to assets may actually help the bank to sustain or improve its margins in the near term.

5)The standard restructured advances were at Rs500 crore (42BPS of advances) having reduced from 0.67% (Rs568.3 crore) in Q3FY2016. There was no additional restructuring and no sale to asset reconstruction company during the quarter and the total security receipts (SRs) stood at Rs258 crore (22BPS of the advances) which make for a robust performance in the backdrop of rampant asset quality stress among its banking peers.

 

Technically View:

 

The stock is currently trading around 50 days and 100 days, moving average that is all about good positive moov& uptrend signal on daily base. RSI &MFI is present at 57 and 78respectivally, which is uptrend& showing the sideways formation for the short term period. The stock is currently in the upward formation and when it hold above 1400 then somemore upside is expecting with major support is found 1360 level. MACD line is greaterthen signal line 10 day Avg Volume is very high.

 

VALUATION & OUTLOOK:

 

Yes Bank is available at 2.9x FY2018 BV which is attractive given its comfortable capital position. It has a capital to risk (weighted) assets ratio (CRAR) of 16.9% (Tier-1 at 12.2%), attractive return on equity (RoE) of 20+% and return on asset (RoA) of 1.8+%.

 

It has successfully built an attractive franchise and a steadily growing retail business. We are positive on Yes Bank and maintain a “Buy” rating on the stock with an unchanged price target of Rs1,520.

 

We retain our Buy recommend in this script with a price target of Rs 1500-1520 in the very short term outlook. So Entry would be around 1360-1380as recomanded in this counter.

 

Yes Bank Stock Market Research Report

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Company Overview:

 

 

YES BANK has been recognized amongst the Top and Fastest Growing Banks in various Indian Banking League Tables by prestigious media houses and Global Advisory Firms, and has received several national and international honours for our various Businesses including Corporate Investment Banking, Treasury, Transaction Banking, and Sustainable practices through Responsible Banking. YES BANK is steadily evolving as the Professionals’ Bank of India with the long term mission of “Building the Finest Quality Bank of the World in India” by 2020.

Key points

Strong NII, declining COFs help profits:

Yes Bank posted strong results for Q3FY2017 with a strong net interest income (NII) growth as well maintaining the asset quality. The NII for Q3FY2017 increased by 30.3% year on year (YoY) to Rs1,507.5crore on the back of strong advances and growth in the current and savings account (CASA). The net interest margin (NIM) expanded to 3.5% (up 10 basis points [BPS] from Q2FY2017). NIMs expansion was mainly due to the cost of funds (CoF) coming down due to softening interest rates and a rise in CASA deposits. While the treasury profit helped the Other income grow by 33.8% YoY to Rs998.3 crore, the bank is steadily building its fee income stream.

 Strong growth traction continues:

Yes Bank saw strong growth traction as its advances grew smartly by 38.7% YoY to Rs117,087 crore with Corporate Banking (which accounts for 68.9% of the advances) was up 42% YoY and Retail & Business banking business (including micro, small & medium enterprises [MSME]; forming 31.1% of the advances) was by 32% YoY. Deposits grew by 30.5% YoY to Rs132,375.8crore.

 

Performance highlights:.

The performance on CASA deposits front was robust (CASA ratio up 300BPS from Q2 to 33.3%), helped partly by the demonetisation drive but also indicating the improvement in retail segment. Both SA deposits (Rs29,348crore) and CA deposits (Rs14,778 crore) grew by 13% and 14% respectively since Q2FY2017. The management has indicated that amongst the small and medium enterprises (SME) clients, most are adopting the formal banking channel which is positive for the long term.

Brand Pillars:

The YES BANK brand is built around key Brand Pillars, which epitomize the growing strengths of the Bank. All communication and advertising has been created around these key brand pillars.

  • Growth: YES BANK's core promise is growth for its internal and external stakeholders symbolized in ‘Say YES to Growth!’

  • Trust: YES BANK's Promoters, Investors, and Top Management team are all of the highest pedigree with a demonstrated track record, thus inspiring and establishing a Trust Mark – ‘Say YES to Trust!’
  • Innovation & Technology: YES BANK is establishing the highest standards in customer service by adopting cutting-edge, innovative Technology. The only thing constant about technology used at YES BANK is Evolution.

Valuation :

 

Particulars

FY 15

FY 16

FY17E

Net Interest Income(cr)

3487.8

4566.7

5459.1

Net Profit

2005.4

2539.4

3133.2

EPS

48.7

60.4

74.5

EPS Growth (%)

8.57

23.98

23.38

PE (X)

21.8

17.6

14.2

Book Value

283.0

327.0

386.1

P/BV

3.7

3.2

2.7

RoE (%)

21.3

19.9

20.9

RoA (%)

1.6

1.7

1.8

 

Highlights the fact:

1)Yes Bank, by virtue of its size (and thereby avoiding large-ticket problem loans), and business mix has been able to perform better than peers.

2)Yes Bank has consciously decided to pursue balance sheet growth via customer assets (advances plus credit substitutes).

3)Yes Bank’s asset quality has been good with the gross non-performing advances (GNPA) stable at 0.85% and net non-performing advances (NNPA) also stable at 0.29% as compared with Q2 and credit cost at only 8BPS for Q3FY2017.

4)Faster deposit repricing compared to assets may actually help the bank to sustain or improve its margins in the near term.

5)The standard restructured advances were at Rs500 crore (42BPS of advances) having reduced from 0.67% (Rs568.3 crore) in Q3FY2016. There was no additional restructuring and no sale to asset reconstruction company during the quarter and the total security receipts (SRs) stood at Rs258 crore (22BPS of the advances) which make for a robust performance in the backdrop of rampant asset quality stress among its banking peers.

 

Technically View:

 

The stock is currently trading around 50 days and 100 days, moving average that is all about good positive moov& uptrend signal on daily base. RSI &MFI is present at 57 and 78respectivally, which is uptrend& showing the sideways formation for the short term period. The stock is currently in the upward formation and when it hold above 1400 then somemore upside is expecting with major support is found 1360 level. MACD line is greaterthen signal line 10 day Avg Volume is very high.

 

VALUATION & OUTLOOK:

 

Yes Bank is available at 2.9x FY2018 BV which is attractive given its comfortable capital position. It has a capital to risk (weighted) assets ratio (CRAR) of 16.9% (Tier-1 at 12.2%), attractive return on equity (RoE) of 20+% and return on asset (RoA) of 1.8+%.

 

It has successfully built an attractive franchise and a steadily growing retail business. We are positive on Yes Bank and maintain a “Buy” rating on the stock with an unchanged price target of Rs1,520.

 

We retain our Buy recommend in this script with a price target of Rs 1500-1520 in the very short term outlook. So Entry would be around 1360-1380as recomanded in this counter.

 

Markets start week on cautious note with profit booking on the anvil.US$ sees weakness as Trump immigration policy causes debate on the same on wider forum!!

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Major headlines:

·         Oil extends declines on rising U.S output

·         NPPA slashes prices of 33 essential medicines

·         Demonetisation to bring revenue to Government

INDEX PERFORMANCE

 

 

Indices

Support

Resistanes

Sensex

8525

8645

Nifty

27519

27820

 

Indian Indices:With most Asian markets shut for holiday the cues from Australia & Japan were weak with both indices seeing cuts of nearly 1%. Globally after a superb start to the New Year profit booking seems the theme for this week as caution returns at higher levels.US$ weakened further while bond yields also softened as gold prices rallied indicating flight to safety after a heady run for equities.


Nifty will also see initial weakness after rising sharply last week as 8700 proves a resilient top. With the Union Budget to be announced on Wednesday expect range bound market movement for today &tomorrow with rumours on stock/sector driving prices. Foreign flows to stay positive with US$ weakness prompting value buying.


The BSE Sensex is currently trading at 27859.52, down by 22.94 points or 0.08% after trading in a range of 27813.32 and 27916.20. There were 12 stocks advancing against 18 stocks declining on the index. The broader indices were trading mixed; the BSE Mid cap index was up by 0.13%, while Small cap index was down by 0.08%.

The CNX Nifty is currently trading at 8627.50, down by 13.75 points or 0.16% after trading in a range of 8617.75 and 8650.15. There were 16 stocks advancing against 35 stocks declining on the index.


MARKET INDICATORS

·           

 

Group ATopGainers

 

 

Company

Price (Rs)

% chg

IDEA

83.55

7.39

RDEL

60.80

6.20

RCOM

32.45

5.02

Jindalstel

83.00

4.53

Group ATopLosers

 

 

Aplltd

560.50

-2.50

CUB

150.75

-2.43

Edelweiss

110.10

-2.35

MRF

52150.00

-2.10

Market Statistics

 

 

 

BSE

NSE

Advances

1084

1020

Declines

1146

470

 

Technical view: Nifty faces resistance around 8700-8720 while support emerges around 8580-8600.Bank Nifty finds resistance around 19800 while support emerges around 19400.

Market Sentiment:

The market breadth on BSE was negative in the ratio of 1084:1146, while 168 scrips remained unchanged.

 

Trading ideas :EICHERMOT (Buy above Rs 23600 for target of Rs 24300, SL at Rs 23250): Stock has given a breakout from downward sloping trendline on daily charts, which connected two previous lower highs. Also stock managed to successfully close above its 100-DMA placed at Rs 23070 levels. The breakout has been confirmed on lower time frame charts with spurt in volumes, which may augur well for the stock. We advise to Buy Eicher Motor above Rs 23600, stop loss at Rs 23250 and Target of Rs 24300.

Corporate SnippetsLokesh Machines Ltd is set to enter into an agreement with EMCO GmbH of Austria for the manufacture and sale of the latters machines in India and export supplies.

Jain Irrigation Systems will raise USD 200mn through issuance of dollar bonds—for the first time –to overseas investors, primarily to retire debt.

Aditya Birla Group plans to invest Rs 70 bn in the next two years in Andhra Pradesh on expanding existing businesses.

MarutiSuzki India Ltd said that it will increase prices of products ranging from Rs 1500 to Rs 8014 (ex-showroom, Delhi) across models.

Nifty Movers:  The top gainers on Nifty were Idea Cellular up by 7.05%, BhartiAirtel up by 4.49%, Grasim Industries up by 2.19%, Sun Pharma up by 1.60% and Dr. Reddy’s Lab up by 1.39%.

On the flip side, AurobindoPharma down by 2.14%, Tata Motors - DVR down by 1.77%, BhartiInfratel down by 1.27%, Hero MotoCorp down by 1.24% and Wipro down by 1.19% were the top losers.

Top Sectoral& Stock Screening: The top gaining sectoral indices on the BSE were Realty up by 1.00%, Capital Goods up by 0.38% and FMCG up by 0.22%, while IT down by 0.86%, Auto down by 0.65%, Consumer Durables down by 0.60%, Oil & Gas down by 0.40% and Bankex down by 0.32% were the losing indices on BSE.

The top gainers on the Sensex were BhartiAirtel up by 4.44%, Sun Pharma up by 1.74%, Dr. Reddy’s Lab up by 1.28%, Power Grid up by 0.71% and Lupin up by 0.70%.

 

 

 

On the global front: On the global front, Asian markets were exhibiting mixed trend at this point of time, though most of the Asian equity benchmarks are closed on Monday for Lunar New Year holidays. The US markets made a mixed closing in last session after a lack luster trade, as investors weighed disappointing fourth-quarter data on domestic economic growth and a spate of earnings.

 

Global Signals: The Asian markets were trading mixed; Nikkei 225 decreased 108.27 points or 0.56% to 19,359.13, while Jakarta Composite increased 3.98 points or 0.07% to 5,316.82.

Markets in China, Singapore, South Korea, Taiwan, Malaysia and Hong Kong were shut on Monday for the Lunar New Year holiday.

 

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