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MOSL: PNB HOUSING FINANCE (Neutral)-Retailisation of AUM continues

PNB HOUSING FINANCE: Retailisation of AUM continues

(PNBHOUSI IN, Mkt Cap USD1.6b, CMP INR720, TP INR760, 5% Upside, Neutral)

 

• PNBHF reported a PAT of INR2.4b in 1QFY22 (v/s INR2.6b YoY). The 45% beat was driven by lower-than-estimated credit costs (~0.9% annualized) and opex (47%/9% below our estimate).
• Asset quality deteriorated with Gross Stage 3 increasing by 155bp QoQ to 6%. Few corporate accounts in Stage 2 and under the SICR pool slipped into NPAs. Total restructured pool (under both OTR 1.0 and 2.0) stood at INR17.33b (~2.9% of loan assets).
• PNBHF is working on different initiatives to optimize costs, leverage digital solutions to improve processes across underwriting, collections, and originations, and reduce the proportion of corporate loans in its AUM mix.
• The fate of the announced equity raise still remains the key monitorable in the near-team since a lot of other changes at PNBHF will be contingent upon the successful completion of this proposed capital raise.
• We have largely maintained our FY22E EPS estimate, wherein lower NII has been mitigated by a minor cut in credit costs. We maintain our Neutral rating with a TP of INR760/share (1.2x FY23E BVPS).