PNB Housing Finance's stock price surged more than 14% on Monday, April 1, 2024, on the back of a bullish outlook and rating upgrade.
In a recent update, global securities firm Morgan Stanley upgraded the stock to “overweight” and set a target price of INRThis target represents a potential upside of nearly 35% from today's high and 54% from Thursday's (March 28) closing price.
The optimistic outlook follows upgrades by rating agencies ICRA and CARE, which upgraded the company's long-term rating in view of improved asset quality.
The stock rose as much as 14.5% in intraday trading, hitting its highest price of the day. INRMonday is 720.40. With today's gains, the stock is now up nearly 79% from its 52-week low. INR403.28 dated March 21, 2023. However, it is still more than 21% off its 52-week high. INR913.95, recorded on January 25, 2024.
The stock has risen about 48% over the past year, but is down about 8% since the beginning of 2024, with negative returns in two of the past four months. It fell 9.3% in March and 11.5% in February. However, it was flat in January, rising just 0.5%.
In a recent note, Morgan Stanley emphasized that housing finance companies have traditionally been able to deliver strong results in the fourth quarter due to loan growth and improved asset quality.
“This upgrade is also supported by the housing finance company's strengthened capital base and diversification of its resource profile.The housing finance company's performance in the fourth quarter was above normal, driven by loan growth and improved asset quality. The stock is doing well,” the brokerage firm said.
He added that PNB Housing is attractive to investors as it has a valuation of 1x P/B and 9x P/E for FY2025.
Meanwhile, CARE Ratings has upgraded PNB Housing's rating from “AA” to “AA+” and changed its outlook from “positive” to “stable.” This upgrade can be attributed to the company's improved asset quality and strong market position.
CARE said the upgrade reflects the company's improved asset quality, with the GNPA ratio increasing from 8% as of March 31, 2022 to 1.73% as of December 31, 2023. He said that It also reflects the company's strong market position as the third largest housing finance company. Looking at the Indian company by loan assets as of December 31, 2023, the company's well-diversified resource profile was cited as a key factor in the rating revision.
The upgraded ratings apply to a wide range of schemes and bonds, including long-term and short-term banking schemes, bonds, convertible bonds, Tier-2 bonds, and term deposits.
Finally, rating agency ICRA also upgraded PNB Housing Finance's debt product rating from “ICRA AA (Positive)'' to “ICRA AA+ (Stable).'' Similar to the CARE upgrade, this can also be attributed to the consistent strengthening of the company's credit profile, driven by improved asset quality metrics and stronger capital profile.
Given the intense competition in the mortgage finance sector, ICRA emphasized the importance of PNB Housing's ability to maintain net interest margins, increase operational efficiency and effectively manage credit costs from a credit perspective.
Disclaimer: The views and recommendations above are those of individual analysts or brokerages and not of Mint. We recommend checking with a certified professional before making any investment decisions.
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