PNB Housing Finance share price jumps as IIFL Securities assigns ‘Buy’ rating, sees 35% upside

PNB Housing Finance share price extended gains, rallying up to 3% on Wednesday after IIFL Securities initiated coverage on the stock with a bullish view. PNB Housing Finance shares gained 3% to ₹804.80 apiece on the BSE.

IIFL Securities has assigned a ‘Buy’ rating to PNB Housing Finance shares and a 12-months target price of ₹1,050 per share, implying an upside potential of more than 34% from Tuesday’s closing price.

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“PNB Housing Finance has firmly put behind the tumultuous period post the IL&FS crisis by raising capital and securing rating upgrade to AA+. This has been accompanied by credible management change, stressed assets clean-up, operating model revamp (decentralised underwriting, focussed collections), and business pivot by setting up dedicated affordable and emerging prime verticals,” IIFL Securities said.

It expects PNB Housing Finance’s to grow its loan book at 19% Cagr over FY24-27, led by the rapid scale-up of the emerging and affordable segments (~45% Cagr) and prime book growing at 9% Cagr, driven by favourable tailwinds for the Real Estate and Mortgage sector. 

Rising share of more profitable emerging prime and affordable segments will help it sustain net interest margins (NIM) even when the interest rates are cut (end FY25 base case), which is otherwise negative for floating rate mortgage lenders (banks / HFCs), IIFL said. 

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Its analysis indicates that PNB Housing Finance is likely to sustain NIMs and expand spreads by ~5-10 bps by 4QFY26 even after assuming 50 bps interest rate cuts. 

Consequently, the brokerage firm expects PNB Housing Finance to deliver PPOP and PAT growth of 17% and 16% Cagr (FY24-27) and ROA and ROEs of 2.2% and 12.0% by FY27 at leverage of 5.5x (average asset/equity) with potential to deliver ~14.5% ROEs at a normalised leverage of 6.5x.

PNB Housing Finance share price has rallied over 26% in the last three months, while the stock is up just 1.5% year-to-date (YTD). 

At 9:50 am, PNB Housing Finance shares were trading 1.48% higher at ₹792.90 apiece on the BSE.

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