PNB Housing is a housing finance company with presence in individual housing loans, loan against property and construction finance. 61% of the loan portfolio of the company is individual housing loans, followed by 18% LAP and the balance 20% made up of construction, corporate and lease rental discounting finance. As of Mar 2016, the total loan book of PNB Housing was Rs 271bn. The loan book is broadly equally divided between salaried and non-salaried segments, which account for ~40 and ~45% of the loan book respectively.
IPO of PNB Housing Finance is slated to Happen Soon based on the Market Condition.
Ambit Capital's Pankaj Agarwal and Aadesh mehta has the following Recommendation,
We believe PNB Housing Finance is best benchmarked with LICHF, Repco Home Finance and Canfin Homes due to quasi-PSU ownership. That said, the peers LICHF, Repco and Canfin trade at an average valuation of 4.2x FY16 PB and 25x FY16 PE. On a presumed listing price of `473/share, PNBHF would be commanding 2.8x FY16 PB and 17x FY16 PE, which implies ~30% discount to peers despite comparable RoEs of ~18%.
Data about PNB Housing Finance.
FY2017 Annualized EPS is expected to be Rs 30.25
Book Value Per Share Post IPO will be between Rs 313.95 to Rs 316.39 depending on the pricing of the issue [Rs 750 or Rs 775]
P/E of PNB Housing Finance will be around 25
P/B of PNB Housing Finance will be around 2.45
Now compare this to listed Peers,
LIC Housing Finance P/E = 18 and P/B = 3.15
Dewan Housing Finance P/E = 12 and P/B = 1.8
HDFC P/E = 31 and P/B = 6 [HDFC is Holding company for HDFC Bank, HDFC Standard Life, HDFC Ergo, HDFC Mutual Fund, etc]
Let us wait on what Analysts have to say about the PNB Housing Finance IPO.
Quant Securities Analyst Jignesh Shial has the following view,
At upper band, the company is valued at Rs119.1bn, quoting at 2.3x P/Book FY16 (post dilution) which is quite reasonable compared to peers like CanFin Homes which is trading at 6x P/Book FY16 numbers. Considering healthy business momentum, relatively low risk model as well reasonable valuations, we recommend SUBSCRIBE to the issue.
IDBI Capital's Ravikant Bhat has the following Review
We therefore feel there are strong earnings levers for PNB Housing over next 2-3 years that could actually push up it’s valuations. We would like to highlight Repco Home Finance in this regard, whose valuations have re-rated from 1.9x 1-yr forward P/ABV at IPO price to around 4.5x now. It may be noted that Repco was almost 1/10th the size of PNB Housing at the time of listing. Repco’s strong growth and improving earnings strength led to a steady re-rating for the stock. We see PNB Housing’s presence in perceptibly more riskier segments than Repco did (pure housing with self-employed category) as the key risk to such re-rating. We recommend investors to SUBSCRIBE to PNB Housing IPO for the strong compounding story it offers in an attractive growth segment.
KR Choksey Analyst Shweta Daptardar said,
On FY16 basis pre-issue PNBHF is trading at 4.5x P/BV (BV at INR 169). Post issue, PNBHF is expected to trade at 2.3x P/BV FY17E and 2.0x P/BV FY18E. While FY18 valuations stand attractive, downside risks; viz, equity dilution, anticipated asset quality pressures ahead particularly on account of higher proportion of non-retail loans and unlikelihood of RoEs sustenance at current high levels. As the short term challenges persist in terms of sustenance of higher levels growth and profitability with higher likelihood of asset quality risks emerging from non-retail segment, we believe the company can be bought only to reap long term benefits.
Motilal Oswal in Analyst Note said,
At a price band of INR 750-775, the issue is priced at 4.6x FY16 P/B (and at 2.5x adjusted for IPO funds) which is attractive given its track record of growth, stable return ratios and robust outlook on the housing finance industry. Management conducted restructuring of entire business which began in FY11 and concluded in FY16, resulting into significant improvement of the business. The outcome was a robust 62% loan book CAGR over FY12-16. Though the company's ROE is lower (at 17.6%) than the industry peers (22.4%) however growth in AUM has been significantly higher (62% vs 20-25% for industry). Valuation is at a reasonable discount to its peers, when considered on the post issue book value.
IIFL Capital has the following Review on the IPO,
We expect PHF to deliver 45%+ earnings CAGR over FY16-18. At the upper price band, valuation is mildly attractive at 2.1x FY18 P/ABV and 18x FY18 P/E. It is lower than large HFCs and at sharp discount to niche players like Can Fin and Repco. We recommend subscribing into the IPO with the expectation of healthy long-term investment returns.
Religare Securities Analyst, Siji Phillip said,
In the price band of Rs 750 - 775, company is valued at ~2.4x FY16BV (post IPO) which is slightly stretched visa-a-vis DHFL (~1.8x) but it is still cheaper than Can Fin (~6x) and HDFC (~4x). PNBHFL’s foray into affordable housing targeting Tier II/Tier III cities, growth prospects, steady asset quality and strong ROE (18%) will support its valuations over the next couple of years.
AUM Capital Analysts Sanjeev Jain and Tanya Kothary said,
At the higher price band of Rs.775, the company is valued at 4.58x of its FY16 Book Value. This is at a premium to other listed HFCs. A relatively better earnings outlook, strong parentage, healthy return ratios, improving Cost/Income ratio, softening interest rate
cycle coupled with Government’s focus on economic growth and robust outlook on the housing finance industry make the stock
investment worthy for long term perspective. Hence, we recommend a Subscribe on the issue.
IndiaNivesh Research Said,
At upper end of valuation band, PNB Housing will be trading at P/ABV of 2.5x post issue capital and 2.1x for FY18E ABV. While the valuation multiple on post capital trailing basis looks higher, we believe higher valuation multiple is justified in context of significantly higher than industry growth rate, expected improvement in operating efficiency and higher earnings. We believe PNB Housing is good investment for long term investment and hence recommend SUBSCRIBE to this issue.
Angel Broking Analyst Purohit said,
At the upper price band, the issue is offered at 4.6x its FY16 BV. However at the post issue BV of `311, it is offered at 2.5x. PNBH is all geared up for its next leg of growth and has the potential to become a significant player in the Indian mortgage business. Looking at the quality of management, which can drive the growth, we recommend a SUBSRIBE to the issue.
Phillip Capital analysts said,
At the upper end of the price band (Rs 750-775), the issue is valued at 2.5x its post-issue book value per share of Rs 316. PNBHF saw an AUM CAGR of 61% in FY12-16, translating into earnings growth of 40% and RoE range of 15.4-18.5%. We expect PAT CAGR of 49% over FY16-18, driven by a loan book CAGR of 39% and NIM expansion of 40bps to 3.2%. At the upper end of the price band, the issue is valued at 2.3x/2.1x FY17/18 adjusted book value of Rs 336/371 and 25x/18x FY17/18 EPS of Rs 31/44. We recommend investors Subscribe to this issue based on strong growth and reasonable valuations.
