29 September 2017
Equities - India
10 Yrs G-Sec
10 Yrs AAA Corp
Flows (USD b)
Note: YTD is calendar year, *Avg
Today’s top research idea
PNB Housing: In the Big League; A perfect blend of growth with quality
PNBHF is a classic turnaround story, driven by a change in shareholding
(Destimoney Enterprises purchased 26% stake in PNBHF) and management.
Over FY10-15, the company invested in technology, re-jigged its
operations/processes, diversified its loan book and expanded in new
geographies. Thus, its loan book grew from INR40b to INR400b+ and PAT
increased from INR0.8b to INR5.2b over FY12-17.
PNBHF has effectively leveraged on a hub-and-spoke model. It has incurred
significant technology/branch infrastructure costs over past few years, and we
expect operating leverage benefits to accrue with strong growth (C/I ratio to
reduce by 600bp over FY17-20).
Asset quality has been one of the best among peers – GNPL ratio (2-year lag
basis) of 0.5% as of FY17. However, with a likely more seasoned loan book and
higher corporate exposure, we expect modest increase in GNPA and credit
costs. Yet, we expect RoA to remain largely stable at ~1.5%. With increasing
leverage over time, RoE should cross 19% by FY20.
We initiate coverage with a Buy and TP of INR1,675 (22x Sep 2019E EPS),
implying 3.7x Sep-2019E BVPS.
In the Big League; A perfect blend of growth with quality
Read-through from Accenture's FY18 guidance and 4Q commentary
Advancement and PMLA affect 2QFY18 sales
Healthy retails, discounts to drive 2W/PV wholesales
Piping hot news
Government sticks to $2.08 trillion borrowing plan for FY18
The government will raise Rs2.08 trillion through market borrowings in the
second half of 2017-18, sticking to its budget, but does not rule out the
possibility of selling more government bonds for additional spending.
Chart of the Day: PNB Housing: In the Big League; A perfect blend of growth with quality
GNPA as of FY17 (%) – Best-in-class asset quality
Source: MOSL, Company
Research Team (Gautam.Duggad@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.