Buy PNB Housing Finance; target of Rs 1400: Emkay Global Financial

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • PNB Housing Finance reported a strong 2QFY27, with disbursements up 60% yoy and PAT up 6%, driven by broad-based growth led by Affordable and Emerging markets.
  • Management targets ~45% of retail assets in these higher-yielding segments by FY27-end, with a focus on improving asset mix, higher incremental yields, and gradual funding benefits from the rating upgrade.
  • Underlying NIM is expected to improve from ~3.5%, supported by better asset mix and higher incremental yields, with the recent rate hike largely being passed on.
  • Asset quality remains healthy, with GNPA improving to 0.91% and strong legacy recoveries leading to negative credit cost, while normalized credit cost is expected at ~10-12bps.

Thesis Validation Checklist

  • Monitor loan-book growth, with a focus on Affordable and Emerging markets, and the ability to maintain ROA guidance of ~2.4%.
  • Track the improvement in underlying NIM, driven by better asset mix and higher incremental yields.
  • Watch for asset quality trends, with a focus on GNPA and credit cost.
  • Monitor the impact of the proposed insurance-commission regulations on the company's operations and profitability.