Buy PNB Housing Finance; target of Rs 1350: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • High-yielding segments: PNB Housing Finance is shifting focus towards high-yielding segments like micro housing, emerging developer finance, and affordable housing to offset the impact of higher interest rates.
  • Loan growth acceleration: The company has reported its highest loan growth since FY19, with 19% YoY growth in Q2FY27, driven by a strong rebound in disbursements.
  • Spread expansion: Core spreads have expanded 12bps QoQ, driven by higher incremental yields and a strategic pivot towards high-yielding segments.
  • Asset quality: The company has reported a tenth consecutive quarter of provision write-back, with GNPA improving to 0.91% and NNPA to 0.55%.

Thesis Validation Checklist

  • Loan growth: Monitor loan growth trajectory, particularly in high-yielding segments, to assess the company's ability to achieve its guidance of 18-20% loan growth in FY27.
  • Spread expansion: Track the company's ability to maintain spread expansion, driven by higher incremental yields and a favorable mix of high-yielding segments.
  • Asset quality: Closely monitor asset quality metrics, such as GNPA and NNPA, to assess the company's ability to maintain its strong asset quality.
  • Regulatory developments: Keep an eye on regulatory developments, particularly with regards to the housing finance sector, which may impact the company's growth prospects.