PNB Housing Finance: Should you buy, sell or hold after Q3 results?

Synopsis: PNB Housing Finance posted steady Q3 FY26 earnings with healthy NII growth and stable asset quality, while softer profits and affordable housing trends kept sentiment cautious; Morgan Stanley sees valuation comfort and long-term upside.

This small-cap NBFC stock, engaged in providing home loans, loans against property, commercial financing, lease rental discounting, and developer funding across India, fell by 10 percent after the company announced decent December quarterly results, even as Morgan Stanley set a target price of Rs. 1,170 per share and explained the reasons for the stock’s decline.

With a market capitalization of Rs. 22,355.54 crores, the share of PNB Housing Finance Limited has reached an intraday low of Rs. 838.35 per equity share, down nearly 10 percent from its previous day’s close price of Rs. 931.45. Since then, the stock has retreated and is currently trading at Rs. 858.15 per equity share. 

Q3 FY26 Result Walkthrough:

Coming into the quarterly results of PNB Housing Finance Limited, the company’s consolidated Net Interest Income increased by 10.92 percent YOY, from Rs. 696 crore in Q3 FY25 to Rs. 772 crore in Q3 FY26, and grew by 0.92 percent QoQ from Rs. 765 crore in Q2 FY26.

In Q3 FY26, PNB Housing Finance Limited’s consolidated net profit increased by 7.87 percent YOY, reaching Rs. 521 crore compared to Rs. 483 crore during the same period last year. As compared to Q2 FY26, the net profit has decreased by 10.48 percent, from Rs. 582 crore. The basic earnings per share increased by 7.53 percent and stood at Rs. 20 as against Rs. 18.60 recorded in the same quarter in the previous year, FY2025.

In terms of return ratios, the company’s ROA and ROE stand at 2.57 percent and 12.31 percent, respectively. PNB Housing Finance Limited has an earnings per share (EPS) of Rs. 86.3, and its debt-to-equity ratio is 3.62x.

Reason for the Fall:

PNB Housing Finance Limited’s shares came under pressure after its Q3 performance missed market expectations on several key metrics. Net interest income rose 10.1 percent YoY, but came in 1.9 percent below estimates, while pre-provision operating profit increased 8.3 percent YoY, missing estimates by 5.6 percent. The miss was driven by weaker-than-expected other income growth of just 8 percent YoY and a sharp 36 percent YoY rise in employee costs, which weighed on operating profitability.

Profit after tax grew 7.7 percent YoY, but was still 3.5 percent below estimates, reinforcing concerns around earnings momentum. While overall loan growth stood at a healthy 14 percent YoY, retail loan growth of 16 percent fell short of management’s full-year guidance of 17-18 percent, raising doubts over execution in the near term.

Another key concern was disbursement growth, which stood at 15.6 percent YoY, lower than estimates, with affordable housing disbursements declining 15 percent YoY, seen as a negative by analysts. Management attributed the slowdown to government ordinance-related issues in certain regions and expects a recovery with 20-25 percent QoQ growth from Q4. The company aims to raise the affordable and emerging segment share to 45-50 percent from 39 percent while maintaining its ROA guidance of 2.6-2.7 percent.

Non-Performing Assets Performance:

PNB Housing Finance Limited’s asset quality remains stable with a gradual improvement in non-performing assets. Gross NPAs (GNPA) stood at Rs. 857 crore in Q3 FY25, declined to Rs. 816 crore in Q4 FY25, and then remained broadly steady, reaching Rs. 855 crore in Q3 FY26. In percentage terms, GNPA reduced from 1.19 percent in Q3 FY25 to 1.04 percent in Q3 FY26, indicating better asset quality over the year.

Net NPAs (NNPA) also showed improvement, declining from 0.80 percent in Q3 FY25 to 0.68 percent in Q3 FY26. This reflects improved recoveries and effective risk management, with lower stressed assets after provisions. Overall, the stable GNPA levels and improving NNPA ratios suggest controlled credit risk and a healthier loan book.

Loan Asset and AUM:

PNB Housing Finance Limited’s Assets Under Management (AUM) stood at Rs. 86,048 crore, marking a 12 percent YoY and 3 percent QoQ increase, driven by sustained loan growth and portfolio expansion. This highlights the company’s ability to scale operations while maintaining balance sheet stability.

Loan assets increased to Rs. 82,203 crore, registering a 14 percent YoY and 3 percent QoQ growth, supported by healthy demand in the housing finance segment and disciplined lending practices. Meanwhile, deposits stood at Rs. 17,772 crore, with a well-balanced funding mix of 84 percent public deposits and 16 percent inter-corporate deposits, strengthening liquidity and funding stability.

Brokerage Viewpoints:

Morgan Stanley, a prominent brokerage firm, has recommended a “Buy” call on PNB Housing Finance Limited with a target price of Rs. 1,170 per share, indicating an upside potential of 36.34 percent from its current price of Rs. Rs. 858.15 per equity share. 

Morgan Stanley has maintained an Overweight rating on PNB Housing Finance Limited despite a softer Q3 performance. The quarter missed expectations mainly due to weaker performance across multiple business lines, including a decline in affordable housing disbursements on both a YoY and QoQ basis. This has raised some concerns among investors about potential downside risks to near-term earnings forecasts.

However, Morgan Stanley believes the current valuation provides comfort. The stock is trading at around 1x FY28 price-to-book, which offers a margin of safety even if near-term performance remains muted. The brokerage also highlights that the market will closely watch strategic commentary from the newly appointed MD & CEO, as clarity on growth, asset quality, and execution could help rebuild confidence and support the target valuation over time.

PNB Housing Finance Limited is a company engaged in providing housing finance solutions, including home loans for purchase, construction, repair, and renovation of residential properties, alongside loans against property, commercial property financing, lease rental discounting, and loans for real estate developers and residential plots.

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