UBS bullish on PNB Housing turnaround story, sees 17% upside; stock gains

International brokerage UBS kicked off coverage on PNB Housing Finance shares on Friday, June 27, believing in the firm's turnaround story coupled with reasonable valuations.

The brokerage issued a 'buy' rating and a price target of Rs 1,300 per share, indicating a 17 percent upside. PNB Housing Finance is one of the largest housing finance companies (HFC) in India with a loan book of Rs 80,000 crore. While prime loans make up 73 percent of its loan book, the company is diversifying into the emerging and affordable loan segments, which UBS thinks are a better fit for the firm given its AA+ credit rating.

The brokerage added that expansion into these new segments could support a 16 percent AUM CAGR over FY25-27E, and forecast 40 percent of the book would be non-prime by FY27 vs 25 percent in FY25. "We expect this, in turn, to drive yield expansion, leading to a 13 percent EPS CAGR over FY25-27E. An increase in leverage could lead to a 13%+ ROE by FY28E," said the brokerage.

At 9.15 a.m., shares of the firm were quoting Rs 1,128.3 on the NSE, up 1.6 percent.