This Small Cap Stock Grew 18.64% In 1 Month, Accumulate With Target Price Rs 475: Nirmal Bang

Nirmal Bang upgraded the PNB Housing Finance Limited (PNBHF) stock to Accumulate with a target price of Rs 475 per share. With the given target price, the stock is likely to give a return of 6%. PNBHF is a small-cap NBFC in the Housing finance sector promoted by the Punjab National Bank. It has a market capitalisation of Rs 7,559.88 Crore.

Current Market Price, 52 High & low, Returns

The current market price (CMP) of the stock as on 28 October 2022 is Rs 448.35 per share on NSE. The stock hit its 52 week high in December 2021 at Rs 602.50 and its 52 week low in May 2022 at Rs 311.45, respectively.

The stock surged 4.84% in a week, giving a positive return. It gave 18.64% positive returns in the past 1 month, whereas, in the past 3 Months, it gave 22.28% positive returns. The stock fell 9.79% in a year, 12.13% in 3 years and 68.39% in 5 years, respectively. 

 

Higher contingent provisions impact profitability; new MD/CEO takes charge and execution would be key

PNB Housing Finance's (PNBHF) net profit growth for 2QFY23 was broadly in-line with our estimate, increasing by 12.7% YoY. Operating numbers were strong on the back of margin expansion and sustaining operating expenditure. AUM continued its declining trajectory on a YoY basis and decreased by 5.8%. On a sequential basis, it came in the positive territory for the first time in the last nine quarters and increased by 1.4% QoQ to Rs657bn. NII increased by 35.8% YoY (72.8% QoQ) on the back of significant improvement in margin. NIM expanded by 135bps YoY (174bps QoQ) to 4.1%.

The management expects sustainable spread and NIM (excluding securitized income) to be ~2.2% and 3.2%, respectively going forward. Opex increased by 14.2% YoY to Rs1,260mn. Cost/income ratio improved to 17.8% vs 20.5% in 2QFY22 as opex increased at a lower pace compared to net revenue. As a result, operating profit increased by 35.8% YoY (60.8% QoQ) to Rs5,815mn. The management indicated that the company had made additional contingent provisions of ~Rs600mn, leading to elevated overall provisions of Rs2,432mn vs Rs1,418mn in 2QFY22. PAT increased by 12.7% YoY to Rs2,629mn. Asset quality improved, led by a decline in GNPA in the Retail segment and the focus is to bring down overall GNPA going forward.

Mr Girish Kousgi has recently joined the Board as MD/CEO and the key vision is to improved asset quality, growth with profitability and maintaining high liquidity. The management highlighted that the company is likely to raise funds of Rs25bn via a rights issue by the end of 3QFY23. "We believe that the fund raising plan, along with strengthening of the Board and the management team warrants a re-rating with gradual improvement in return ratios. However, we remain watchful about following: (i) corporate segment asset quality (ii) growth in overall book (iii) margin trajectory going forward. We upgrade the stock to ACCUMULATE with a target price (TP) of Rs475 (0.9x 1HFY25E ABVPS)," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Nirmal Bang. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.