Whalesbook
Motilal Oswal has initiated coverage on Five Star Business Finance with a strong BUY recommendation, setting a new price target of ₹600. This positive outlook stems from the company's recent financial performance and robust growth projections for the coming years.
Financial Performance Review
The company reported a slight 4% year-on-year decline in its fourth-quarter Profit After Tax (PAT) to INR2.7 billion. However, for the full fiscal year 2026, PAT saw a modest increase of approximately 2%, reaching INR11 billion. Net Interest Income (NII) demonstrated healthy growth, rising by about 10% year-on-year to INR6.1 billion. Operating expenses increased by 21% year-on-year, which contributed to a Profit Before Provision and Operating Profit (PPOP) growth of around 5% for the quarter and 11% for the full year. Annualized credit costs remained stable, reported at approximately 1.55% of assets.
Growth Prospects and Valuation
Looking ahead, Motilal Oswal estimates Five Star Business Finance will achieve a Compound Annual Growth Rate (CAGR) of roughly 21% in Assets Under Management (AUM) and 12% in PAT between fiscal years 2026 and 2028. The firm anticipates Return on Assets (RoA) and Return on Equity (RoE) to reach 6.6% and 15%, respectively, by FY28. The current stock valuation stands at 1.7 times its estimated price-to-book value (P/BV) for FY27, with the INR600 target price based on a multiple of 1.8 times the projected book value for March 2028.