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The shares of one of the leading housing finance firm gained around 14.5 percent to ₹720.40 per share on Monday’s trade after Morgan Stanley gave an overweight call on the stock with an upside of 32 percent. 

On Tuesday’s early trade, PNB Housing Finance Ltd. shares were trading at ₹733.40 a share on the National Stock Exchange, down 2.15 percent from the previous close. The company has a market value of ₹ 18,533 crore. 

PNB Housing Finance offers retail customers housing and non-housing loans, including individual home loans, loans against property, and non-resident property loans. 

The company experienced a slight annual decline in revenue of 2 percent, moving from ₹1,787 crore in Q3FY23 to ₹1,748 crore in Q3FY24. Conversely, during this period, net profit surged by 28 percent, rising from ₹272 crore to ₹347 crore. 

Over the past 12 months, shares of PNB Housing Finance Ltd. have seen a notable increase of 59 percent. However, in the last six months, there has been a 4 percent decrease in share value. 

Morgan Stanley has given an overweight rating on PNB Housing Finance with a target price of ₹ 970, per share, representing a 32 percent increase from Tuesday’s trading price of ₹733 per share. 

Furthermore, CARE Ratings Ltd. (“CARE”) and ICRA have elevated the company’s long-term rating to ‘AA+’. This upgrade is attributed to enhancements in the company’s asset quality and is applicable across various facilities and debt instruments, encompassing long-term and short-term bank facilities, bonds, non-convertible bonds, tier-2 bonds, and fixed deposits. 

Moreover, the rating improvement is reinforced by the housing finance company’s bolstered capital position and diversified resource profile. Morgan Stanley observed that housing finance companies typically experience robust performance in the fourth quarter owing to loan growth and enhanced asset quality.

According to the brokerage, PNB Housing presents an appealing investment opportunity with a valuation of 1x FY25 P/B and 9x P/E ratios. 

ICRA’s report highlights the upgrade in the rating of PNB Housing Finance Limited, attributing it to the consistent enhancement in its credit profile. This improvement stems from better asset quality metrics and a reinforced capitalization profile. 

ICRA further acknowledges PNB Housing’s strong standing in the mortgage finance sector, citing its substantial assets under management (AUM) of ₹68,549 crore and a loan book amounting to ₹62,337 crore as of December 31, 2023. 

The NBFC’s non-performing assets (NPAs) decreased to 1.7% as of December 31, 2023, down from 3.8% as of March 31, 2023 (previously 8.1% as of March 31, 2022), with assistance from sales to asset reconstruction companies (ARCs), write-offs, recoveries, and reduced new NPAs. This information was highlighted in an ICRA report. 

Written by Omkar Chitnis

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