PNB Housing Finance Ltd reported a 39 per cent a 39 per cent YoY rise in net profit for the December quarter, slightly beating the Street estimates, on the back of higher net interest income (NII) and lower provisions. Anlaysts said the December quarter disbursements grew strong at 30 per cent YoY, leading to tweaks in FY25 and FY26 estimates.
"We tweak our FY25/ FY26E estimates on strong disbursements in nine months of FY25. We reiterate BUY with an unchanged target price of Rs 1,100 (1.4 times December 2026E ABVPS). A premium over 5-year average P/ABV of 0.9 times is justified given the shift towards affordable housing/ emerging markets (EM) and strong execution on asset quality," Nirmal Bang Institutional Equities said.
This brokerage is building in a loan growth of 16.5 per cent in FY25E, driven by affordable/EM segments. It sees NIM sustaining at around 3.5 per cent supported by growth in high-yield segments. Opex may remain elevated as the HFC opens new branches, Nirmal Bang said.
PNB Housing shares at 1.1 times FY27 price to book value (P/BV). At this valuation multiple, the risk-reward looks favorable for a re-rating as investors gain higher confidence in the HFC's sustained execution in retail (across prime, emerging, and affordable segments), said MOFSL.
"We reiterate Buy with a target price of Rs 1,160 (based on 1.5 times Sep’26E BVPS). Key risks: a) inability to drive NIM expansion amid aggressive competition in mortgages, and b) subsequent seasoning in the affordable loan book leading to asset quality deterioration," it said.
The HFC plans to open 10 new branches in Q4 and is targeting a growth of 17 per cent in retail loans in FY25. For the December quarter, retail loans grew 17.5 per cent YoY or 4 per cent QoQ, Corporate loans saw a decline of 44 per cent YoY and 19 per cent QoQ, resulting in overall loan growth of 15 per cent YoY or 3.5 per cent QoQ. The share of retail assets stood at 98 per cent of the total loan book.
The NBFC is being selective in the corporate portfolio and expects growth to return in Q4. However, over the long term, it expects the share of corporate loans to remain restricted at less than 10 per cent while affordable housing and EM businesses are likely to contribute 40-45 per cent against 5 per cent and 18 per cent currently.
For NIM, PNB Housing highlighted levers such as the rising share of affordable/ EM in the mix and growth in the corporate portfolio for sustainable improvement in yields over the medium-term to 4 per cent.
"We expect FY25 NIM to sustain at 3.5 per cent (in line with guidance) due to BT-out pressures, with a gradual improvement in FY26/ FY27. Opex-to-Assets ratio stood at 1.1 per cent for 3QFY25 and the company expects it to remain elevated over the medium-term (1 per cent) as it expands the Affordable Housing/EM vertical," the domestic brokerage said.