PNB Housing share price targets after in-line Q2 results indicate up to 20% upside

PNB Housing Finance’s September-quarter results were largely in line with analyst expectations on net interest income (NII) and pre-provision operating profit (PPoP), but outperformed at the net profit level due to negative credit costs. Brokerages expect the housing finance company (HFC) to sustain healthy loan growth, with stable net interest margins (NIMs) and asset quality metrics. A few analysts have reiterated their ‘Buy’ ratings on the stock, with target prices implying up to 20 per cent potential upside from current levels. 

Nirmal Bang expects NIM for PNB Housing to sustain at 3.6 per cent in FY26E, supported by growth in high-yield segments. Opex-to-AUM is expected to be at 1.1 per cent.

"Asset quality stood stable in 2QFY26 and we expect strong recoveries and benign credit costs to continue. We have projected the loan book and earnings to clock a CAGR of 14.6 per cent/11.2 per cent over FY25-FY28E, which will result in a RoA/RoE of 2.3 per cent/11.8 per cent in FY28E. We reiterate our BUY rating with a target of Rs 1,100 (as against Rs 1,050 earlier)," Nirmal Bang said.

The target is at a premium of 28.8 per cent over the five-year average price to adjusted book value of 1x, which the brokerage said is justified given the shift toward the Affordable Housing/EM segments and strong execution on asset quality.

MOFSL said PNB Housing delivered an in-line performance in Q2, although earnings were a beat primarily due to the ECL release of Rs 70 crore from the foreclosure of a standard corporate account. Disbursements were marginally soft, impacted by slower growth in the prime segment, while NIM moderated during the quarter owing to lower investment yields, it said. 

"Asset quality was stable, and sustained recoveries from the written-off pool resulted in write-backs for the sixth consecutive quarter. PNB Housing is focused on maintaining profitability through disciplined margin management. Its commitment to controlled growth and prudent asset quality management positions it favorably for sustained execution," the brokerage said.

MOFSL said the franchise has its inherent strengths, but the HFC board will need to instill greater investor confidence by appointing a suitable successor who closely aligns with the articulated strategy of the company. It reiterated 'Buy' with a target of Rs 1,080.