Shares of PNB Housing Finance surged as much as 10% in trade on April 29 as investors lapped up the stock buoyed by the company’s stellar earnings show for the March quarter.
The housing finance company’s net profit swelled 28% year-on-year to Rs 567.1 crore, also aided by a provision write-back of Rs 64.85 crore. In comparison, the company suffered an additional expense of Rs 6.63 crore last year. In addition, a 10% jump in other income from the year-ago quarter also bolstered the PNB Housing's net profit.
Net interest income also grew 17% on year to Rs 728 crore while total income rose over 8% to Rs 1,301 crore.
The company also impressed investors with an improvement in its asset quality as gross NPA eased to 1.08% in Q4 from 1.19% in the previous quarter. On the other hand, net NPA came at 0.69%, lower than 0.8% figure seen a quarter ago.
Meanwhile, PNB Housing's Assets Under Management also crossed the Rs 80,000 crore-milestone, expanding by nearly 13% year-on-year and 4.5% sequentially. Loan growth for the company also remained healthy at 16% on year even amidst overall weakness in demand, driven by retail loans which grew 18%.
Factoring in PNB Housing’s strong Q4 earnings, global investment firm Morgan Stanley stated that the company stands out amidst asset quality and growth concerns due to recoveries from a large pool, faster loan growth, falling funding costs and transformation driving expansion in its Return on Assets (RoA).
Impressed by that, Morgan Stanley also retained its ‘overweight’ rating on PNB Housing, with a price target of Rs 1,350 per share. The firm also believes that key earnings drivers for PNB Housing progressed as expected and higher recoveries drove the earnings beat.
Analysts at HDFC Securities share similar optimism as they believe PNB Housing’s pivot towards higher-yielding loans across segments through significant investments in distribution for affordable and emerging segments and shift towards non home loans in the prime segment are likely to aid margins in the current rate cut scenario.
However, the analysts also cautioned that opex ratios with the high pace of investments and normalisation of credit costs by FY27 are likely to put pressure on return ratios.
