Hold PNB Housing; target of Rs 770: Arihant Capital

Arihant Capital 's research report on PNB Housing

PNB Housing Finance (PNBHFL) reported muted performance during Q1FY20. Profit for the quarter grew by 11% YoY to Rs 284 cr,  impacted due to lower disbursements and higher credit cost. NII for the quarter grew by 45% YoY/2.6% QOQ to Rs 625 cr while  margins compressed by 4bps QoQ. Disbursements during the quarter declined by 22% YoY to Rs 7634 cr, primarily due to company’s  cautious approach towards wholesale loan book which resulted into corporate disbursement de-growth of 81% YoY. PNB housing  finance maintained excess liquidity of Rs 5000 cr in form of cash and liquid investments as on 30th Jun 2019. AUM growth was strong
at 29% YoY to Rs 88,333 cr driven by retail housing and construction finance portfolio. Asset quality took a hit with stage 3 assets at 0.85% vs. 0.48% QoQ.

Outlook

Asset quality deterioration was mainly due to a corporate loan of Rs 150 cr slipped during the quarter and seasonality effect. We have a
Hold rating on the stock with a target price of Rs 770 per share.