PNB Housing Finance - Tide Has Turned, Smooth Ride Ahead: Motilal Oswal

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Motilal Oswal Report

PNB Housing Finance Ltd. has pivoted from consolidation to growth mode, and we expect it to deliver a healthy compound annual growth rate of 18% in assets under management and ~25% in profit after tax over FY24-26, with RoA/RoE of 2.5%/13.5% by FY26.

The company trades at 1.1 time FY26E price/book value, and we believe that risk-reward is favorable for a further re-rating in the valuation multiple as investors gain more confidence in the company’s sustained execution in retail (both prime and affordable).

PNB Housing Finance is our top pick in our NBFC/HFC coverage with a target price of Rs 1,025 (based on 1.4 times FY26E P/BV).

Key risks:

1. inability to drive net interest margin expansion amid aggressive competitive in mortgages,

2. slowdown in economy leading to lower demand for housing and moderation in loan growth, and

3. subsequent seasoning in the affordable loan book leading to asset quality deterioration.

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