ICICI Securities has started coverage on PNB Housing Finance with a 'Buy' rating and a ₹1,350 target price. The brokerage highlights strong retail loan growth and expansion in the affordable housing segment. While the company reported a 13% rise in assets, investors should note that elevated funding costs have put pressure on profit margins.
ICICI Securities has initiated coverage on PNB Housing Finance with a 'Buy' recommendation, setting a price target of ₹1,350. The brokerage’s outlook is driven by the company’s focus on high-growth areas, particularly within the affordable and emerging housing segments, which are expected to improve overall loan yields.
The company’s recent financial results support this growth narrative. For the first quarter of fiscal year 2027, PNB Housing Finance reported a 13% year-on-year rise in its Assets Under Management (AUM), which reached ₹93,021 crore. Retail loan assets, which make up 99.5% of the total loan portfolio, recorded a 16% increase. Specifically, the affordable and emerging markets segment grew by 27% during the quarter and now represents 41% of the retail loan book, highlighting the company’s strategic push into this space.
Profitability and Margin Trends
While the company is seeing strong growth, it faces challenges related to profitability margins. In the June quarter, net interest margins—the difference between the interest earned on loans and the interest paid on deposits and borrowings—declined to 3.50% from 3.74% in the same period last year. This compression was largely due to higher borrowing costs in the current economic environment.
On the positive side, asset quality has seen steady improvement. The company reported a Gross Non-Performing Asset (NPA) ratio of 0.95% for the first quarter, reflecting a healthier loan book compared to previous periods. The brokerage’s target price of ₹1,350 is based on a valuation of 1.5 times the company's estimated price-to-book value for September 2027.
Future Outlook for Investors
Moving forward, the management has projected a strong recovery in loan disbursements for the second quarter of the current fiscal year. The primary monitorable for investors will be whether this volume growth can offset the impact of higher funding costs on profit margins. Additionally, as the company increases its exposure to the affordable housing segment, the ability to maintain asset quality while growing at a fast pace will remain an important factor to track.