Motilal Oswal Financial Services has reiterated its BUY recommendation on PNB Housing Finance, projecting a target price of Rs 1,080. The research report evaluates PNB HF's overall performance and market positioning, while the company’s recent quarter was in-line on operational metrics, earnings were flattered by a one-off corporate account foreclosure. Investors are urged to monitor not just growth, but strategic execution and management succession, as PNB Housing tilts toward risk-calibrated expansion in its affordable and emerging segments. The stock, currently trading at 1.1x FY27E PBV, boasts a robust loan book, stable asset quality, sustained recoveries, yet faces competitive and governance risks in the year ahead.

Motilal Oswal’s Investment Thesis for PNB Housing Finance

PNB Housing Finance delivers a pragmatic set of numbers, balancing dynamic retail expansion with steady asset quality. The research house spotlights the in-line performance for Q2FY26, underscored by 17% YoY retail loan growth, resilient asset quality (GNPA at 1.04%), and a nimble shift toward high-yielding segments. Earnings, however, were buoyed by an exceptional ECL release, not underlying business momentum.

The report reaffirms a BUY rating with a target of Rs 1,080, expecting a loan and PAT CAGR of 16-18% and capitalizing on recoveries from the written-off pool to drive near-term profitability. Investors must be cognizant of management transition risk and the tight leash required to navigate rising delinquencies, especially as PNB Housing deepens its bets on informal and self-employed segments.

Key Financial Highlights and Estimates

Net Interest Income (NII) for FY26 is projected at Rs 30.9 billion, while PAT is forecasted to touch Rs 22.9 billion, implying an 18% YoY EPS growth for the period. Despite a nominal compression in NIM by 7 basis points QoQ to 3.67%, operating profits are robust, and asset quality remains resilient.

Retail loan growth led the expansion, with a 17% YoY jump to Rs 794 billion, and the share of affordable/emerging loans rising to 38% of the retail portfolio. Disbursements in the affordable segment saw a notable 121% YoY surge, edged by aggressive physical expansion into Tier 2 and 3 cities.

Here’s a consolidated snapshot for performance of PNB Housing Finance

Strategic Advances and Operational Execution

Management is intensifying its focus on affordable and emerging segments, targeting 30-40 new branches annually to deepen penetration in underserved geographies. The ongoing roll-out of PMAY 2.0 is expected to catalyze higher participation from informal and self-employed borrowers, raising the yield and risk profile of the loan book.

There is a deliberate moderation in the prime segment while credit policies for corporate lending have been revamped for more selective, low-risk disbursements. PNB Housing’s posture is disciplined, balancing scalable opportunity against the imperative for asset quality and profitability preservation.

Risks, Challenges, and Corporate Governance

The appointment of a new CEO looms as a pivotal event – protracted leadership gaps could undermine investor confidence, even with current business momentum intact. Asset quality risks lurk beneath the gradually seasoning affordable and emerging portfolios, with higher delinquencies a material threat as the book migrates toward informal segments.

The report also flags competitive pressure in mortgages as a risk to further NIM expansion, alongside the specter of rising credit costs in the event of macroeconomic or portfolio shocks. Operational excellence in recoveries and disciplined underwriting will dictate whether these structural risks manifest.

Valuation, Stock Levels, and Investment Call

The stock trades at a compelling 1.1x FY27E Price-to-Book, with a target price set at Rs 1,080 and an explicit 16% upside from current levels (CMP Rs 928). This reflects confidence in PNB Housing’s ability to maintain earnings momentum via recoveries, branch-led scale-up, and margin discipline.

For investors, the decisive levels to monitor are:

Target Price: Rs 1,080

Immediate Support: Rs 900

Resistance: Rs 1,050

The company’s ability to meet or exceed its guidance for loan growth (17-18% for FY26), NIMs (3.6-3.7%), and maintain GNPAs under 1% will remain the defining triggers for rerating, especially during and after the CEO succession window. The recommendation holds with a BUY, leaning on the confluence of prudent management, structural expansion and a favorable risk-reward at prevailing multiples.