Buy PNB Housing Finance; target of Rs 1010: ICICI Securities

ICICI Securities research report on PNB Housing Finance

PNB Housing Finance’s (PNBHF) strategy to build a scalable and sustainable retail mortgage business has been showing signs of success as reflected in 10% YoY growth in retail business during Q4FY24 - highest in past 5 years. With new management’s focus on widening the target market and expanding yields, it has been investing in building up its affordable and emerging mortgage market while continuing to scale up its prime mortgage business in a calibrated manner. The same was evident from its affordable housing book reaching 11x to INR 17.9bn in last one year, contributing ~12% of overall disbursements. Notably, the company has been able to do so whilst consistently improving its asset quality, with GNPA reaching 1.5% in Q4FY24 (3.8% in Q4FY23). With focus on sustainably growing the retail book with high yielding segments (17% growth for FY25E), the management plans to sustain RoA of >2.0%, whilst maintaining NIM and credit cost (ex-write-backs) at 3.5% and 0.3% on a steady-state basis.

Outlook

Maintain BUY with an unchanged target price of INR 1,010, valuing the stock at 1.5x PBV Sep’25E BVPS.

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