'Buy' PNB Housing Finance Maintains Motilal Oswal On Favorable Risk-Rewards

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Motilal Oswal Report

PNB Housing Finance Ltd.’s long-term strategy focuses on:

1. deepening affordable housing penetration through branch-led sourcing,

2. maintaining pricing discipline to protect NIMs,

3. driving operating leverage via productivity improvements, and

4. scaling up cautiously in corporate lending to boost blended yields.

The company targets branch expansion for FY26-27, along with 4%+ NIMs (by end-FY27) and 15%+ RoE (within two-three years), through strategic capital deployment and operating efficiency gains.

PNB Housing Finance is strategically focused on maintaining profitability through disciplined margin management, driven by a strategic shift toward higher-yielding affordable and emerging housing segments, coupled with a cautious resumption of corporate disbursements. Its commitment to controlled growth (~18% Retail loan growth) and prudent asset quality management positions it favorably.

We expect PNB Housing Finance to deliver a healthy ~19% CAGR in the loan book and ~18% CAGR in PAT over FY25-27, with an RoA/RoE of 2.5%/13.3% by FY27.

The company trades at 1.4x FY27E P/BV and the risk-reward is favorable for a further re-rating in the valuation multiple as investors gain more confidence in its sustained execution in retail (both emerging and affordable segments). Reiterate Buy with a target price of Rs 1,300 (based on 1.6x Mar’27 P/BV).

Key risks:

1. sustained NIM contraction due to heightened competitive intensity from banks and other large HFCs,

2. any senior management exits, and

3. while not imminent, the RBI’s October 4 draft circular on bank ownership in group NBFCs could potentially lead to a further reduction in Punjab National Bank’s stake in PNB Housing Finance.

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