MOSL: PNB HOUSING FINANCE (Buy)-Growth slows down-well placed on liquidity front

PNB Housing Finance: Growth slows down; well placed on liquidity front

(PNBHOUSI IN, Mkt Cap USD2.0b, CMP INR873, TP INR1215, 39% Upside, Buy)

• PNB Housing Finance’s (PNBHF) 2QFY19 PAT increased 33% YoY to INR2.5b (4% miss). While PPoP was 4% above our estimates, higher credit costs led to the PAT miss.
• The quarter was marginally slower on the growth front. Disbursements grew 14% YoY (-14% QoQ) to INR84b. However, the repayment rate (annualized) improved 500bp to 27%. As a result, AUM growth came in at a robust 43% YoY. The share of home loans increased ~200bp QoQ to 58%, while that of CF decreased ~100bp to 12%.
• Calculated spreads declined 30bp YoY to 2.14%, the lowest in the past several quarters. This was due to 40bp+ YoY yield compression. PNBHF has taken a 20bp yield hike in October. The company has managed its treasury very well – CoF has hovered in the range of ~7.7-7.8% for the past four quarters. Note that in our annual report analysis, we had highlighted how almost all NCDs issued in FY18 were at a cost below 8% and only 3% of secured NCDs will mature in FY19, thus minimizing refinancing risk in FY19.
• The company tweaked its borrowing profile by reducing the share of CPs (down from 16% to 12% QoQ) and correspondingly increasing the share of bank loans (16% to 20% QoQ).