PNB Housing Finance Q2 Results Review - Retail Assets Continue To Drive Growth: ICICI Securities

ICICI Securities Report

PNB Housing Finance Ltd.’s revamped business strategy of ‘Retailization’, focusing on scaling the retail mortgage business (prime + emerging + affordable), is progressing well, with 4% QoQ growth in retail loans and share of affordable and emerging market segments accounting for 31% of retail disbursement during Q2 FY25.

Notably, incremental yields across retail products continued to exhibit an improving trend, evident in more than 10 basis points QoQ increase in Prime, >20 bps QoQ in emerging markets and >35 bps QoQ in affordable segment.

Strong traction in affordable housing continued with AUM touching ~Rs 30 billion. Spread expanded 10 bps QoQ to 2.2% driven by an 8 bps QoQ drop in cost of fund (two credit rating upgrade in past two quarters) and 2 bps QoQ yield expansion to 10.05%. ~70% floating rate borrowing (bodes well during falling rate cycle), rising share of high yielding emerging + affordable and steady increase in disbursement yield would ensure PNB Housing Finance maintaining net interest margin at 3.65% versus its guided range of 3.5% during FY25. Retain Buy with a revised target price of Rs 1,200 (earlier Rs 1,010), valuing the stock at 1.75 times (1.5 times earlier) PBV Sep’25E.

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