PNB Housing Finance shares: Buy stock, says Nirmal Bang; target suggests 28% upside

Nirmal Bang Institutional Equities has revised its target price for PNB Housing Finance to Rs 1,000, reducing it from the previous Rs 1,300. This update comes in the wake of the recent resignation of PNB Housing Finance's Managing Director and CEO, Mr. Girish Kousgi. Mr. Kousgi will continue in his role until 28 October 2025, ensuring a smooth transition while the company searches for a successor.

Nirmal Bang participated in a conference call hosted by PNB Housing Finance to address investor concerns about the leadership change. During the call, management expressed confidence in maintaining business continuity and assured that the company's strategy remains focused on affordable housing and emerging market (EM) segments. They aim to drive growth and margins despite the changes at the top. This confidence is rooted in the company's consistent performance and strategic focus, which have been institutionalized across leadership layers.

The brokerage firm noted that PNB Housing Finance's new portfolio shows no signs of stress, projecting a negative credit cost for FY26. The firm's asset quality remains robust, with Gross Non-Performing Assets (GNPA) at 1.06% and Net Non-Performing Assets (NNPA) at 0.69% as of the first quarter of FY26. Collection efficiency stands strong at approximately 99%, supported by a well-structured collection architecture and dedicated teams across different stages of the collection cycle.

However, Nirmal Bang highlighted potential impacts of the management change, noting that it could affect growth and margins to some extent. "We have cut our earnings estimates by 1.8% / 9.8% for FY26E / FY27E on expectations of a slowdown in loan growth to 15.3% / 13.1% in FY26E / FY27E respectively. We have also cut our NIM expectation for FY27E to 3.8% as against the company'ss guidance of >4%. Valuing PNBHF at 1.2x June 2027E ABV we revise our target to Rs 1000 (from Rs 1300 earlier, valued at 1.6x June 2027E ABV). Considering the sharp correction in its stock price, we maintain a Buy rating on PNBHF," the firm stated.

The target price suggests 28 per cent potential upside over the prevailing price. 

To ensure leadership stability during this transition, the company has appointed Mr. Jatul Anand as Executive Director. In the event that a new CEO is not appointed by October, Mr. Anand will take on interim CEO responsibilities. The Nomination and Remuneration Committee (NRC) has begun the process of identifying Mr. Kousgi's successor, considering both internal and external candidates. This process is crucial to maintaining the company's strategic direction and operational continuity.

Furthermore, PNB Housing Finance has outlined a strategy to continue its focus on retail lending, particularly affordable housing. The company projects around 18% loan book growth for FY26 and expects Net Interest Margin (NIM) to remain between 3.65.70%. The changes made under Mr. Kousgi's leadership are believed to be deeply embedded, ensuring consistent performance despite leadership transitions. This strategic continuity is expected to support the company's growth trajectory and enhance its market position.

Valli Sekar, previously pivotal in expanding the affordable housing division, has been elevated to Chief Business Officer for affordable housing. Mr. Jatul Anand, with over two decades of industry experience, will oversee the Prime and Emerging markets verticals. Key roles such as CFO, CRO, and HR are held by seasoned professionals, ensuring operational continuity. This strong leadership pipeline is instrumental in delivering consistent performance and navigating through the leadership transition.

Investors and stakeholders are advised to keep an eye on the leadership transition as it may influence the company's performance in the short term. However, the robust foundation laid by the outgoing leadership is expected to support ongoing strategic initiatives. PNB Housing Finance remains committed to its growth trajectory, supported by a strong leadership pipeline. The company's focus on affordable housing and emerging markets is expected to drive future growth and improve margins, ensuring it remains a key player in the industry.

In conclusion, while the leadership change introduces some uncertainty, the company's strategic plans and robust asset quality provide a solid foundation for future growth. The emphasis on affordable housing and emerging markets, coupled with a strong leadership team, positions PNB Housing Finance to navigate this transition effectively and continue its upward trajectory.