Kotak Institutional Equities in its report said that “we are surprised at the valuation at which Yes Bank is trading and reiterate our negative view. The recent news flow pertains to closure/near closures of earlier announced transactions (sale of NPLs to the ARC and capital infusion) and not a fresh development. Although these are crucial milestones to achieve, we perhaps need to see more than what we are able to see currently to justify these premium multiples.”
The research firm further stated that “we had been concerned about their post moratorium capital structure, ability to improve their liability franchise and retaining their existing employees, given that the organization needs time to recover.”
It expects Yes Bank to deliver lower returns than the frontline banks and values the bank at 1.2X book and 20X.
At 11.57 am, the stock was trading over 1% higher at Rs 22.35 per share on BSE. Also, it has climbed 75% in the last six months.
Global brokerage firm Morgan Stanley also initiated underweight coverage on Yes Bank with a target price of Rs 20.5 per share, which shows an 8% downside from the current market price.
“We expect strong RoA improvement to 1% by F25, helped by higher PPoP margins/lower credit costs as macro improves further. But at 1.6x F24 P/BV, the stock is pricing this in. Beyond 1% RoA, improvement will be tough and gradual as we see much higher competitive intensity in this cycle,” Morgan Stanley said.
“Our price target implies 1.3x Dec-24 P/BV, which we think is fair in the context of 10% F25 RoE,” it added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
