MOSL: Morning India (29/September/17)-1. PNB Housing (In the Big League)- 2. Technology (Read-through from Accenture's FY18 guidance)- 3. Titan Company- 4. Automobile

​MOrning India (29/September/17):

Today’s top research idea

PNB Housing: In the Big League; A perfect blend of growth with quality

• ​PNBHF is a classic turnaround story, driven by a change in shareholding (Destimoney Enterprises purchased 26% stake in PNBHF) and management.
  
• Over FY10-15, the company invested in technology, re-jigged its operations/processes, diversified its loan book and expanded in new geographies. Thus, its loan book grew from INR40b to INR400b+ and PAT increased from INR0.8b to INR5.2b over FY12-17.
  
• PNBHF has effectively leveraged on a hub-and-spoke model. It has incurred significant technology/branch infrastructure costs over past few years, and we expect operating leverage benefits to accrue with strong growth (C/I ratio to reduce by 600bp over FY17-20).
  
• Asset quality has been one of the best among peers – GNPL ratio (2-year lag basis) of 0.5% as of FY17. However, with a likely more seasoned loan book and higher corporate exposure, we expect modest increase in GNPA and credit costs. Yet, we expect RoA to remain largely stable at ~1.5%. With increasing leverage over time, RoE should cross 19% by FY20.
  
• We initiate coverage with a Buy and TP of INR1,675 (22x Sep 2019E EPS), implying 3.7x Sep-2019E BVPS.
  

Piping hot news

Government sticks to $2.08 trillion borrowing plan for FY18

• ​The government will raise Rs2.08 trillion through market borrowings in the second half of 2017-18, sticking to its budget, but does not rule out the possibility of selling more government bonds for additional spending.