ICICI Securities
PNB Housing (Hold)
Target: ₹215
CMP: ₹220.75
PNB Housing has reported better earnings (PAT: ₹257 crore vs I-Sec’s ₹70 crore estimates), driven by better control over operational expenditure (down 26 per cent y-o-y) and lower credit costs (down 54 per cent y-o-y).
Covid provisions of ₹70 crore in Q1-FY21 took the aggregate additional provisions to ₹540 crore (nearly 65 bps of AUM).
As on June 2020, moratorium 2.0 declined to about 39 per cent (retail: approximately 29 per cent).
Other important considerations are: Headline asset quality (GS3: 2.76 per cent) was largely stable because of in-force moratoriums (approx: 85 per cent of the corporate book); retail collections were muted in April/May and picked up predominantly in June; and continue to await clarity (pending Board meeting of promoter PNB) on its participation in the rights issue.
Vulnerability of PNB Housing Finance’s balance sheet to new corporate (and continuing retail) slippages is still a cause of concern. The company is running a very tight ship in shorter ALM buckets leaving very little room for disappointment. We have upgraded the stock to Hold (from Reduce) with a target price of ₹215.