Motilal Oswal - PNB Housing Finance (PNBHOUSING) MOSL: PNB HOUSING FINANCE (Buy)-Positive surprise on growth-incremental spread pressure

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Motilal Oswal

MOSL: PNB HOUSING FINANCE (Buy)-Positive surprise on growth-incremental spread pressure

PNB Housing Finance: Positive surprise on growth; incremental spread pressure

(PNBHF IN, Mkt Cap USD3.4b, CMP INR1326, TP INR1750, 32% Upside, Buy)

PNB Housing Finance’s (PNBHF) 3QFY18 PAT grew at a robust 58% YoY to INR2.18b, led by strong AUM growth, improvement in margins, and lower C/I ratio.
Disbursements more than doubled YoY to INR93b (off a low base). Consequently, AUM increased 53% YoY to INR577b – 5% ahead of our estimate of INR549b. AUM mix continues to inch closer towards non-core loans (LAP, construction finance, etc). Share of these loans increased 160bp QoQ and 400bp YoY to 42.8%.
While calculated spreads (on AUM) came in sequentially flat at 2.08%, the management has lowered its spread guidance from 210-225bp earlier to 195-210bp due to rising G-Sec yields. It has also guided to the following liability mix: Deposits – 25%, NCD – 45%, CP – 15-18%, Banks – 10%+, NHB – 5%.
C/I ratio (calculated) declined 260bp YoY, but increased 110bp QoQ to 24.1%. We believe sustained reduction in C/I ratio is a must for improvement in RoE.
Asset quality remained largely stable with GNPL/NNPL ratio of 0.42%/0.33%. PNBHF also holds a contingency provision buffer of INR760m. The current stock of repossessed assets amounts to INR2b.

25/01/2018 12 EN

Underlying

PNB Housing Finance

PNB Housing Finance Limited (PNBHFL) is an India-based housing finance company. The Company provides housing loans to individuals and corporate bodies for construction, purchase, and repair and up gradation of houses. It also provides loans for commercial space, loan against property and loan for purchase of residential plots. It provides home loans, which include home purchase loans, home extension loans, home construction loans, home improvement loans, residential plot loans and loans for non-resident Indians (NRIs). The Company also provides non-home loans, which include commercial property loans, loan against property (LAP), loan for purchase of non-residential premises (NRP) and lease rental discounting (LRD). The Company also offers construction finance to the real estate developers. In addition, PNBHFL offers fixed deposit products for retail investors. The Company has around 38 branches supported by around 16 underwriting hubs.

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INE572E01012 National Stock Exchange of India India

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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MOSL: PNB HOUSING FINANCE (Buy)-Positive surprise on growth-incremental spread pressure

MOSL: PNB HOUSING FINANCE (Neutral)-Spreads at historical lows; healthy improvement in asset quality in the Corporate book

MOSL: PNB HOUSING FINANCE (Neutral)-Still in consolidation mode

With a more favourable environment, PNB HOUSING FINANCE improves to Slightly Positive

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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