PNB Housing Finance Ltd. saw its shares climb sharply by 8.38% to Rs 1,138 apiece on the BSE, following the release of robust financial results for the June quarter (Q1 FY27). The housing finance company announced a 4% year-on-year (YoY) increase in net profit, reaching Rs 557 crore, while its net interest income grew 6% to Rs 803 crore.
The positive Q1 performance led several prominent brokerages to reaffirm their target prices for the stock. Morgan Stanley maintained its target at Rs 1,405, and UBS reiterated its target of Rs 1,220. Investec and Axis Capital also held their targets steady at Rs 1,200 and Rs 1,150, respectively, according to Bloomberg data.
Strong Asset Growth and Quality
Ajai Shukla, Managing Director and CEO of PNB Housing, highlighted that the company commenced FY27 on a strong footing. Assets under management (AUM) expanded by 13% YoY to Rs 93,021 crore, with the retail loan book growing 16% YoY. Shukla noted that the Affordable and Emerging Markets segments were significant growth drivers, achieving 27% growth and contributing 41% to the retail loan book.
Asset quality remained robust, with gross non-performing assets (GNPA) at 0.95%. Healthy recoveries from the written-off pool further supported profitability, contributing to a credit cost of minus 12 basis points in Q1 FY27 from Rs 67 crore in recoveries.
Operational Efficiency and Digital Transformation
The company continues to focus on strengthening its distribution network and enhancing digital capabilities. Shukla stated, "Our ongoing digital transformation initiatives across sourcing, underwriting, servicing, and collections are helping enhance customer experience, improve operational efficiency, and support scalable growth." He emphasized the company's strong capital position and prudent risk management practices as foundations for sustainable growth and long-term value creation for stakeholders.
Despite a slight increase in the cost of borrowing to 7.36% amidst tight macroeconomic liquidity, PNB Housing maintained a capital risk adequacy ratio of 28.26% as of June 30. Return on assets stood at 2.37%, and return on equity at 11.44% for the quarter. While yields and spreads remained stable, net interest margin (NIM) moderated by 19 basis points quarter-on-quarter, influenced by increased leverage and a true-up from Q4 FY26.
"Management’s commentary on the margin outlook and loan disbursement trajectory will be critical in assessing the earnings sustainability," noted MOFSL, indicating further analysis after the upcoming earnings call.
With 13 'Buy' ratings and two 'Hold' ratings, the consensus target price for PNB Housing shares stands at Rs 1,267.50, implying an 11.4% potential upside from current levels.