Broker’s Call: PNB Housing Fin (Add)

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Target: ₹770

CMP: ₹711.75

PNB Housing Finance’s (PNBHF) Q2FY24 financial performance was an outcome of the successful execution of its renewed ‘retailisation’ strategy. Improving trajectory in earnings continued as reflected in 10 per cent q-o-q growth in PAT to ₹380 crore, thereby improving RoA to 2.24 per cent (2.1 per cent in Q1FY24) – highest in the past 15 quarters. Earnings were mainly driven by 5 per cent q-o-q growth in NII and credit cost moderating to 26 bps vs 40 bps q-o-q (annualised).

This was reflected in 99 per cent of total disbursements towards retail segment (₹4,200 crore, of which ₹370 crore were towards affordable housing) and a sharp decline in corporate book GNPL to 2.9 per cent by September 2023 from 25 per cent in June 2023. Reduction in corporate book NPL was driven by resolution of one large builder account worth ₹800 crore and the same resulted in provision write-back of ₹200 crore in Q2FY24.

Considering the sharp improvement in stressed asset pool with NNPL further moderating to 1.2 per cent (2.59 per cent q-o-q), sustained momentum in retail disbursements and incremental focus on high-yield segments (prime, affordable housing), the management sounded confident of maintaining RoA of about 2 per cent and >15 per cent growth in the near term.