UBS Initiates ‘Buy’ on PNB Housing Finance, Forecasts Rs 1,300 Target with 17% Upside

UBS has kicked off coverage on PNB Housing Finance with a Buy recommendation and a target price of Rs 1,300, suggesting an upside of 17% from the last close (Rs 1,110).

The broker anticipates a mid‑teen AUM CAGR (16%) over FY25–27, fueled by deeper penetration into affordable and emerging housing and diversification into non-prime loans, whose share is projected to rise from 25% in FY25 to 40% by FY27.

UBS also highlights that PNB Housing is currently trading at a discount to peers, despite consistent loan growth and rising RoE.

They flag three primary growth drivers:

Affordable/emerging segments expected to account for 38% of loan book by FY27, contributing 75% of growth

Prime loan segment to contribute remaining 25% of new loan growth

Entry into developer financing, offering significant upside post-FY28

To support this expansion, PNB Housing plans to scale up its branch network from 356 to 500 by FY27.

Financials for Q4 FY25 were strong: net interest income rose ~19% YoY and net profit surged ~28% to ₹567 crore.

Asset quality improved with gross NPA falling to 1.08% from 1.19%, and net NPA declining to 0.69% from 0.80%.

On valuations, UBS sees potential margin pressure from RBI repo cuts in FY26 but expects this to be offset by lower funding costs and steady-state credit cost at 30 bps post-FY27.

The stock has already rallied about 30% in the last three months and approximately 84% over the past two years.