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ICICI Securities Report
PNB Housing Finance Ltd.'s revamped business strategy of ‘Retailisation' with a focus on scaling retail mortgage business (prime, emerging, affordable) is progressing well as reflected in 3% QoQ growth in retail loans (despite seasonality) with share of affordable and emerging market segments accounting for 33% of retail disbursement during Q1 FY25.
Notably, net interest margin sustaining at 3.65% (higher than the guided range of 3.5%) driven by 8 basis points reduction in cost of funds (in an extremely challenging environment) is a key positive.
Incremental cost of funds at 7.75% versus 7.93% in Q4 FY25 and 25 bps higher disbursement yields in emerging plus affordable as compared to prime reinforce our view of PNB Housing Finance sustaining return on asset of more than 2% in FY25.
Strong traction in affordable housing continued with AUM touching ~Rs 23 billion and also turning profitable at vertical level during Q1. We believe the implementation of new origination platform by SaleForce in affordable housing (135 branches are live of total 160 branches) would help in sustaining growth momentum going forward.
Maintain Buy with an unchanged target price of Rs 1,010, valuing the stock at 1.5 times price-to-book value Sep'25E book value per share.
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