Emkay recommended a BUY on Yes Bank (CMP: Rs 165) with a target price of Rs 260.
Yes Bank reported strong set of numbers for 4QFY08, partially allaying the concerns on its exposure to Forex derivatives. The analysts at Emkay say that bank has reported Rs 645 million of net profit for Q4 FY08, far ahead of their expectations of Rs 558 million. 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 Rs 1209 million. 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 Rs 190 million for special contingencies.
The analysts 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 2.1xFY10E ABV.