Whalesbook
Q3 FY26 Performance
Motilal Oswal's analysis reveals Five Star Business Finance's third-quarter fiscal year 2026 earnings met expectations, solidifying the brokerage's optimistic outlook. Profit After Tax (PAT) saw a modest 1% year-on-year growth, reaching INR2.8 billion. Net Interest Income (NII) posted a stronger 12% year-on-year increase to INR6.1 billion, reflecting sustained core lending operations.
The company's other income, however, experienced a dip, rising 33% year-on-year to INR264 million but falling short of the analyst firm's estimate, attributed to a decrease in treasury income. Operating expenses (Opex) climbed 21% year-on-year to INR2.1 billion, also aligning with forecasts. Provisions of approximately INR21 million were made for employee benefits under new labor codes. Profit Before Provisioning and Depreciation (PPoP) grew by a healthy 10% year-on-year to INR4.3 billion. Credit costs remained within expected parameters at INR571 million, translating to an annualized rate of approximately 1.5%, a slight uptick from the previous quarter's 1.35% and the previous year's 0.7%.
Outlook and Valuation
Looking ahead, Five Star Business Finance is currently valued at 1.5 times its projected FY27 Price to Book Value (P/BV). Motilal Oswal forecasts the company to achieve a Compound Annual Growth Rate (CAGR) of approximately 21% in Assets Under Management (AUM) and 15% in PAT between FY26 and FY28. By FY28E, they anticipate Return on Assets (RoA) to reach 6.9% and Return on Equity (RoE) to hit 16%.
Based on these projections and a revised valuation multiple of 1.8 times December 2027E Book Value, Motilal Oswal reiterates its 'BUY' recommendation. The price target is consequently revised upwards to INR590 per share, suggesting significant upside potential for investors. The brokerage emphasizes the company's steady operational performance and growth trajectory in the non-banking financial sector.