Buy PNB Housing Finance; target of Rs 1736: Bonanza

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26 Aug, 2025 12:21

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Recently, the stock price of PNB Housing Finance Ltd. (PNB Housing) corrected by ~17% from 52-week high of Rs.1,717 despite reporting good set of numbers in the recent quarters.  With a change in management in 2011, PNB Housing witnessed an impressive turnaround, with a robust loan CAGR of 60% during FY12-17, driven by increased market penetration, expansion into new territories, higher branch count coupled with increasing branch productivity. Consequently, its market share increased from ~0.5% to over 2%, making it the 5th largest housing finance company (HFC) in India. With a hub-and-spoke model and a central processing center (CPC), the company has ensured that branches focus only on loan sourcing, hubs focus solely on underwriting and the CPC focuses only on file processing. Unlike other HFCs, which are now focusing more on the affordable housing segment, PNB Housing caters largely to the middle and upper-middle class segment. Its average ticket size of Rs.3.2mn in home loans is ~30% higher than that of HDFC and IHFL.

With impressive turnaround, expansion into new territories, well diversified portfolio, developed capabilities to underwrite, plans to further increase branch network, increase its presence in tier-II and tier-III cities in the southern and western regions and lowest funding costs, we value PNB Housing at 4.50x FY19E ABV of Rs.385.70 to arrive at target price of Rs.1,736, an upside of ~22%.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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