PNB Housing Finance, one of India’s leading non-banking financial companies, has been making waves lately. It reported excellent third-quarter results for FY25, which put the company in the limelight, despite the turbulence in the stock market. Its shares went up by more than 4% during early trading hours after its brilliant performance. What does this mean for a potential investor? Should one buy into the stock now, or is it better to wait? In this blog, we dive into PNB Housing Finance’s latest financial results, stock price trends, and expert opinions about its future potential.
Understanding PNB Housing Finance’s Q3 Performance
PNB Housing Finance’s Q3 results for FY25 presented a strong picture of growth, profitability, and improved asset quality. The company reported a net profit of ₹483 crore, which is 43% year-on-year (YoY) growth compared to ₹338 crore in the same quarter of the previous fiscal year. This increase in profit was fueled by robust performance across key financial metrics, including its net interest income (NII) and pre-provision operating profit.
The company’s NII, which is a critical measure of profitability for financial institutions, grew by 17% YoY and 4.1% sequentially (QoQ) to ₹695.7 crore. The NII from the retail segment was even more impressive, growing by 17.4% YoY. Additionally, the Net Interest Margin (NIM) for the quarter stood at 3.70%, up from 3.49% a year ago and 3.68% from the previous quarter.
Another important milestone was that the company’s pre-provision operating profit, or PPOP, was at ₹579.5 crore, up 16.1% YoY and 3.7% QoQ. This shows that PNB Housing Finance can maintain healthy operational margins and manage costs.
1. Asset Quality Improves
One of the most remarkable performances in Q3 belonged to PNB Housing Finance, and it was seen in terms of improvement in the quality of its assets. Gross NPA stood at 1.19% as of December 31, 2024, which came down from 1.24% in September 2024 and 1.73% for the same period last year. The bottom line is the company is managing its loan portfolio well and is reducing non-performing loans, which are of vital importance for any financial institution.
2. Disbursements and Loan Asset Growth
The loan disbursement was quite robust, with 29.9% YoY growth, as Q3FY25 disbursements stood at ₹5,380 crore. The loan assets increased by 15.4% YoY and 3.5% QoQ to ₹71,917 crore. It is evidence of the expanding customer base of the company and its ability to tap into the increasing demand for housing loans in India.
The company’s affordable housing segment also performed exceptionally well, delivering a staggering 127% YoY growth in disbursements to ₹920 crore during the quarter. The affordable housing market continues to be one of the key growth drivers for PNB Housing Finance, and this segment is expected to remain a significant contributor to its future revenue growth.
3. Strong Capital and Liquidity Position
PNB Housing Finance has maintained robust capital and liquidity. This is because, in such a volatile environment, this forms a strong point. In Q3FY25, the company received an NHB (National Housing Bank) refinance sanction of ₹5,000 crore and an ECB sanction of USD 100 million. These funds will assist in bolstering the company’s liquidity position for lending operations hereafter.
Performance of Stock Price and Market Reaction:
Despite the strong performance in Q3, PNB Housing Finance’s share price has been under pressure recently, particularly in the short term. The stock has delivered a modest return of just 2% over the past year. However, it has performed significantly better over a two-year and three-year horizon, providing multi-bagger returns of 100% and over 130%, respectively. This demonstrates the stock’s strong long-term growth potential.
After the Q3 numbers were out, stock prices rose more than 4% in early trade to ₹935 a share. However, the bull run was short-lived as stocks succumbed to profit booking and closed 3% lower at ₹865.95. As of the latest data, stock is trading at discount value compared with recent highs, which offers an opportunity for new investors to step into an attractive price.
a) Technical Analysis and Stock Price Outlook
From a technical perspective, the stock of PNB Housing Finance has been consolidating near its 50-week moving average, which is a critical support level. According to Anshul Jain, Head of Research at Lakshmi Shree Investment and Securities, the stock is currently in a consolidation phase, and a breakout above ₹1,000 would signal the start of a positive momentum. However, if it falls below ₹925 support levels, it shows downside risk as well.
On short-term lines, it has a sideways kind of trend; therefore, either side breakout shall be needed for confirmation of a further move. Budget announcements ahead along with quality asset improvement and the fact that a rebound up to ₹950 seems pretty feasible; makes it all an interesting option for short-term gainer searchers.
b) Investment Recommendations: Buy or Sell?
Leading brokerage firms, such as JM Financial and Motilal Oswal, have kept a ‘Buy’ rating on PNB Housing Finance’s stock, citing strong growth trajectory and profitability in the affordable housing space. The demand in the affordable housing segment is quite robust, and with PNB Housing Finance focusing more on this market, it is placed well for long-term growth.
The company is well-positioned to maintain a healthy average return on assets (ROA) of 2.5% over the next two years, driven by strong retail and corporate disbursements, according to JM Financial. The brokerage has assigned a target price of ₹1,200 per share, implying significant upside potential from the current levels.
It would also be noted that Motilal Oswal has positive growth expectations for the company and underlines that the bank consistently recovers its write-offs from the write-off pool along with asset quality through tough macro times. The broker views PNB Housing Finance and, hence, is poised to witness continued growth within its business lines namely, retail, and affordable housing portfolios and remains a very compelling investment idea within the NBFC space.
Risks and Challenges
PNB Housing Finance has displayed very strong growth over the last quarters. However, investors need to know the risks and challenges which may affect it. The company’s stock was volatile in the short term. Further profit booking might continue because the stock is quite high in terms of valuation. Again, the general economic environment along with increasing interest rates and possibly changes in regulatory frameworks of housing finance might weigh upon the performance of the company.
Conclusion
PNB Housing Finance remains one of the major players in the Indian housing finance market. The strong Q3 performance, improving asset quality, and focus on the high-growth affordable housing sector make this stock an attractive investment option for long-term investors. Though the stock has seen some short-term volatility, its growth potential remains strong, and the company is well-positioned to take advantage of the growing demand for housing in India.
Investors looking for exposure to the housing finance sector should consider PNB Housing Finance as part of their portfolio, especially with the upcoming budget announcements and the company’s continued focus on profitability and growth. Keep an eye on key technical levels, such as ₹925 support and ₹1,000 resistance, to gauge the stock’s near-term movement.
As always, it’s important to conduct your research, consider your risk tolerance, and consult with a financial advisor before making any investment decisions.
0 Comments