Buy PNB Housing; target of Rs 1080: Motilal Oswal

Motilal Oswal's research report on PNB Housing

PNB Housing (PNBHF) delivered a broadly in-line performance in 2QFY26, marked by 1) healthy retail loan growth of ~17% YoY, 2) NIM compression of 7bp QoQ to 3.67%, following a ~10bp PLR cut taken by the company and lower investment yields in the quarter, 3) minor improvement in overall asset quality, even as the 30+ and 90+ dpd in the affordable segment inched up due to portfolio seasoning, and 4) sustained recoveries from its retail and corporate written-off pool, resulting in continued provision write-backs. PNBHF’s 2QFY26 PAT grew 24% YoY to ~INR5.8b (~7% beat). PAT in 1HFY26 grew 24% YoY, and we expect its PAT to grow 14% YoY in 2H. The beat on PAT was primarily due to ECL release from the foreclosure of a standard corporate account. Adjusted for this, earnings would have been in line.

Outlook

We believe that the franchise has its inherent strengths, but the Board will need to instill greater investor confidence by appointing a suitable successor who closely aligns with the articulated strategy of the company. Reiterate BUY with a TP of INR1,080 (based on 1.2x Sep’27E BVPS).