Shares of PNB Housing Finance surged over 14 percent on Monday, April 1, 2024, driven by an optimistic outlook and recent rating upgrades.
Morgan Stanley, a global brokerage firm, recently upgraded the stock to ‘overweight’ with a target price of ₹970, indicating a potential upside of nearly 35 percent from the day’s high and a 54 percent increase from the previous Thursday’s closing.
This positive sentiment follows upgrades by rating agencies ICRA and CARE, which revised the company’s long-term rating upward, reflecting improvements in its asset quality.
The stock soared as much as 14.5 percent in intra-day trading to reach a high of ₹720.40 on Monday. Despite this surge, it remains around 21 percent below its 52-week high of ₹913.95, recorded on January 25, 2024, although it has rebounded almost 79 percent from its 52-week low of ₹403.28, reached on March 21, 2023.
Over the past year, the stock has gained nearly 48 percent but has faced an 8 percent decline in the year-to-date performance, registering negative returns in two out of the four months so far.
Morgan Stanley highlighted in a recent note that housing finance companies typically witness robust performance in the fourth quarter due to increased loan growth and improved asset quality. The brokerage also cited PNB Housing’s strengthened capital position and diversified resource profile as factors supporting the upgrade.
Furthermore, CARE Ratings upgraded PNB Housing’s rating to ‘AA+’ from ‘AA’ with a ‘stable’ outlook, citing the company’s improving asset quality and strong market position. CARE noted the company’s lower gross non-performing asset (GNPA) ratio of 1.73 percent as of December 31, 2023, compared to 8 percent as of March 31, 2022, as a significant improvement.
Similarly, ICRA upgraded PNB Housing Finance’s debt instrument rating to ‘ICRA AA+ (Stable)’ from ‘ICRA AA (Positive)’, attributing the upgrade to the company’s consistent improvement in credit profile and ability to manage competition effectively in the mortgage finance sector.
In summary, these rating upgrades reflect the positive outlook for PNB Housing Finance, driven by improvements in asset quality metrics, reinforced capitalization profile, and effective management of operational challenges in the sector.
