PNB Housing Finance zooms 8% as Morgan Stanley stays bullish, sets target at Rs 970

Shares of PNB Housing Finance zoomed over 8 percent on April 1 after Morgan Stanley put an ‘overweight’ rating on the stock with a target price of Rs 970 per share. The international brokerage’s call comes after CARE Ratings and ICRA upgraded the company’s long-term rating to ‘AA+’ citing improvements in the company’s asset quality.

The upgrade is also supported by the housing finance company’s strengthened capital position and diversified resource profile. The fourth quarter typically sees strong performance for housing finance companies due to loan growth and improved asset quality, noted Morgan Stanley.

With valuation standing at 1x FY25 P/B and 9x P/E, PNB Housing appears attractive to investors, the brokerage said.

CARE Ratings upgraded PNB Housing to ‘AA+’ from ‘AA’ with a ‘stable’ outlook from ‘positive’ due to its improving asset quality and strong market position. The ratings upgrade is applicable to a range of facilities and debt instruments, including its long-term and short-term bank facilities, bonds, non-convertible bonds, tier-2 bonds, and fixed deposits.

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The ratings agency said the upgrade reflected the improved asset quality of the housing finance company, with its gross NPA ratio at 1.73 percent at the end of December 2023, compared to 8 percent in March last year. The stable outlook was on the expectation that the housing financier would show profitable business growth along with healthy resource-raising ability and strong internal accruals.

ICRA has upgraded the company’s debt instrument rating to ‘ICRA AA+ (Stable)’ from ‘ICRA AA (Positive)’. The rating upgrade factors in the sustained improvement in PNB Housing Finance’s credit profile, driven by the improved asset quality metrics and the strengthened capitalisation profile.

Given the intense competition in the mortgage finance business, the company’s ability to maintain its net interest margin while improving its operating efficiency and controlling the credit costs will be important from a credit perspective, it said.

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At 9:32am, PNB Housing Finance shares were trading 8 percent higher at Rs 682.00 on the National Stock Exchange (NSE). In the last one year, the stock has rallied more than 50 percent, outperforming Nifty 50 which has risen around 30 percent during this period.

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