Buy PNB Housing Finance; target of Rs 875: Motilal Oswal

Motilal Oswal's research report on PNB Housing Finance

PAT grew 51% YoY to INR3.8b (37% beat) in 4QFY19, driven by better-than-expected margins and lower provision cost. PNBHF continued to calibrate disbursements in 4QFY19 - disbursements declined 8% QoQ/2% YoY to INR86b, largely due to scale-back in LRD segment. AUM growth was healthy at 6% QoQ/36% YoY to INR847b, despite a moderation in disbursement growth, as the repayment rate declined sharply. Spreads (rep) were stable QoQ (-40bp YoY) at 2.6% owing to a reduction in cost of funds by 15bp QoQ to 8.06%. PNBHF continues to maintain adequate liquidity on the balance sheet (INR70b, equivalent to 1.5 months of outflows).

Outlook

We factor in NIM compression of 20bp and a rise in credit cost by 5-10bp. We cut our earnings estimates 3-6% for FY20/21. Maintain Buy with a TP of INR875 (1.5x FY21E).