27 January 2021
3QFY21 Results Update | Sector: Financials
PNB Housing Finance
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
PNBHOUSI IN
167
59.4 / 0.8
489 / 146
-1/39/-38
193
67.4
CMP: INR353
TP: INR400 (+13%)
Neutral
Stable operating performance; sharp spike in proforma GNPL
PNBHOUSI reported a 3QFY21 PAT of INR2.3b (flat YoY; 13% beat). The beat
was driven by stronger PPOP (13% above our estimate). Opex fell ~26%/7%
YoY/ QoQ. Credit cost stood at INR2.6b v/s our estimate of INR2.3b.
In 9MFY21, PPOP/PAT fell 6%/10% YoY to INR15.3b/INR8b.
Disbursements remain muted. While they were up ~30% sequentially at
INR32b, they were largely flat on a YoY basis. Note that the base itself was
weak.
Consequently, AUM declined 4% QoQ/10% YoY to INR77b.
The company commenced sell down of loans after two quarters, resulting in
upfront assignment income of INR352m.
Calculated spreads declined ~50bp QoQ from a higher base to 3%. 2QFY21
had a large impact of income from securitized loans. The company is able
to incrementally raise funds at 6.7% and is confident of maintaining
spreads in the guided range of 2.1-2.3%.
The reported GS3 ratio was stable QoQ at 2.6%. However, proforma GNPL is
up ~200bp QoQ to 4.47%. Around 1.25% of the loan book (INR8b) is likely to
be restructured.
It increased its ECL provisions across all buckets.
Stage 1 and 2 PCR
increased 40bp to 2.3%, while Stage 3 PCR increased ~300bp to 47%. Note
that PNBHOUSI’s Stage 1 and 2 PCR is among the best in the industry.
The company resolved some small corporate accounts, while the resolution
for some large accounts is underway (refer Exhibit 1). Around
62% of the
corporate book is current (i.e. 0dpd). It has reduced its exposure to its top
20 developers by 7% over the past three quarters.
Received restructuring requests of INR8b (1.25% of loans), of which
retail/corporate is INR6.6b/INR1.46b.
SWAMIH has identified 12 projects of PNBHOUSI worth INR12b that could
go in for resolution.
AUM down 10% YoY; incremental CoF sub-7%
Financials & Valuations (INR b)
Y/E March
NII
PPP
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
NIM (%)
C/I ratio (%)
RoAA (%)
RoE (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
2020
18.1
20.6
6.5
38.4
-46
476
2.6
21.1
0.8
8.3
9.2
0.7
2.5
2021E
20.6
20.6
10.6
63.0
64
523
3.2
17.1
1.4
12.6
5.6
0.7
3.6
2022E
21.4
22.2
11.9
70.5
12
581
3.3
17.9
1.5
12.8
5.0
0.6
3.0
Proforma GNPL at 4.5%; Stage 1, 2 provisions at 2.3%
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
32.7
32.7
DII
3.5
3.6
FII
24.6
24.0
Others
39.3
39.8
FII Includes depository receipts
Dec-19
32.7
6.6
23.1
37.6
Highlights from the management commentary
Valuation and view
Over the past year, the key challenge for the company, apart from COVID-19,
has been its high leverage. The management has consciously slowed down on
loan growth and focused on higher down-selling to address this issue. Leverage
has now fallen to comfortable levels of ~7x. From FY22 onwards, the company
would be in a position to grow its loan book by 10-12% YoY. Current spreads of
~3% are unsustainable and should revert to normalized levels of 2%. The asset
quality picture remains uncertain. We increase our FY22E EPS estimates by 6%
to factor in lower opex and slightly lower provisions. The company should
deliver 13-14% RoE in FY22E/FY23E. Maintain Neutral with a TP of INR400/share
(0.6x FY23E BVPS).
Research Analyst: Piran Engineer
(Piran.Engineer@MotilalOswal.com) |
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
20 January 2020
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