Accumulate PNB Housing Finance; target of Rs 998: Arihant Capital
Arihant Capital ‘s research report on PNB Housing Finance
The slowdown in real estate market is peaking now and there is enough demand seen in retail segment. Though, liquidity scenario has improved compared to Q3FY19, sector continues to see challenges due to higher funding costs resulting into pressure on margin (as compared to last year). In light of liquidity issue and lower demand in reality sector, PNBHFL finds itself in a sweet spot. Company has maintained Rs. 6000 cr liquidity in form of cash and investments as on 9MFY19 and expects to close year FY19 with enough liquidity. PNBHFL has well diversified borrowings profile. It borrows 17%, 30% & 17% from Banks, NCDs and deposits while its CP exposure stood at 11% as on 9MFY19, which was 17% in FY18. Spreads are expected to be in the range of 2-2.5% (2.27% as on Q3FY19) while borrowing costs are expected to be marginally higher in Q4FY19.
At CMP of Rs 862 the stock is available at its FY 20E P/ABV of 1.7(x). We value the stock at a FY20E target P/ABV multiple of 2x, which yields a target price of Rs 998 per share. We have an ‘ACCUMULATE’ rating on the stock.
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