Whalesbook
Motilal Oswal has initiated coverage on Five Star Business Finance with a strong BUY recommendation and a price target of ₹600. The brokerage sees significant potential driven by the company's recent financial results and promising growth forecasts.
Financial Results Show Mixed Q4, Strong Full-Year Growth
Five Star Business Finance reported a slight 4% year-on-year drop in fourth-quarter Profit After Tax (PAT) to INR2.7 billion. However, full-year FY26 PAT grew by approximately 2% to INR11 billion. Net Interest Income (NII) showed healthy growth, increasing about 10% year-on-year to INR6.1 billion. While operating expenses rose 21% year-on-year, Profit Before Provision and Operating Profit (PPOP) still grew around 5% for the quarter and 11% for the full year. Annualized credit costs remained stable at about 1.55% of assets.
Future Growth and Target Price Drivers
Looking ahead, Motilal Oswal forecasts Five Star Business Finance's Assets Under Management (AUM) to grow at a Compound Annual Growth Rate (CAGR) of about 21% and PAT at 12% between FY26 and FY28. The brokerage expects Return on Assets (RoA) to reach 6.6% and Return on Equity (ROE) to hit 15% by FY28. The current stock valuation is 1.7 times its estimated price-to-book value (P/BV) for FY27. The ₹600 target price is based on a 1.8 times multiple of the projected book value for March 2028.