Morgan Stanley has retained its ‘Overweight’ rating on PNB Housing Finance with a target price of ₹1,350, citing a better-than-expected Q1FY26 performance on the bottom line, driven primarily by credit cost reversals and efficient cost control.
The company reported a 9% beat on PAT versus Morgan Stanley’s estimates, aided by a credit cost reversal of ₹562 million, far ahead of expectations pegged at ₹135 million. The pre-provision operating profit (PPOP) beat was around 2%, helped by a 4% reduction in operating expenses compared to the brokerage’s projections.
While net interest income (NII) came in 1% below estimates, and net interest margin (NIM) compression remained broadly in line, Morgan Stanley views the margin trajectory as stable. The bank’s asset quality improved as well, with the gross Stage 3 ratio falling 29 bps YoY to 1.06%, reflecting further stress resolution. Sequentially, Stage 3 also improved by 2 bps.
“We like the improving asset quality trend and continued operating discipline shown by PNB Housing,” said Morgan Stanley, while acknowledging that the valuation and credit cost dynamics offer further scope for upside.
The brokerage has kept its bullish view intact, supported by improving fundamentals and room for further re-rating if growth picks up in the coming quarters.
