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Credit Suisse Initiates Coverage On Two Indian NBFCs

Credit Suisse initiated coverage on PNB Housing Finance and L&T Finance Holdings.



Residential and commercial buildings stand in Mumbai (Photographer: Dhiraj Singh/Bloomberg)
Residential and commercial buildings stand in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

PNB Housing Finance, one of the fastest growing finance company in the country, will be able to sustain the momentum on the back of geographical expansion, according to brokerage firm Credit Suisse.

The brokerage house initiated ‘Outperform’ rating on the mortgage lender, with a target price of Rs 1,780, implying a potential upside of 24 percent from yesterday’s close.

“The company should be able to sustain strong growth via geographical expansion and unique hub-and-spoke model,” Credit Suisse said in a report.

Here’s what it had to say on PNB Housing Finance:

PNB Housing Finance

  • Stock Rating: Initiated ‘Outperform’
  • Target Price: Rs 1,780, implying a potential upside of 24 percent from the current market price.
  • PNB Housing Finance is one of the fastest growing housing finance company.
  • The company should be able to sustain strong growth via geographical expansion and unique hub-and-spoke model.
  • High capitalisation levels and recent large investments in expansion have resulted in subdued return on equities for the company.
  • Expect return on equity of 18 percent by March 2020.
  • Expect loan book, revenue and net profit to grow at a compound annual growth rate of 40 percent, 50 percent and 51 percent over the three financial years till March 2020.
  • As the company gains in overall basis scale we expect benefits from operating leverage kicking in.

The brokerage firm also initiated coverage on L&T Finance Holdings. Here’s what it said:

  • Stock Rating: Initiated ‘Neutral’ rating.
  • Target Price: Rs 210, implying a potential upside of 6 percent from yesterday’s close.
  • New management is identifying new focus areas and pruning defocused businesses.
  • L&T Finance Holdings’ loan book continues to be wholesale heavy.
  • Expect credit costs to remain high on back of higher provisioning requirements against pre-2012 infra problem book and growth in housing, led by builder loans.
  • Higher-than-expected loan losses and slower growth in new retail focus segments are the downside risks.
  • Stronger-than-expected loan growth with low credit costs is the upside risk.