Five-Star Business Finance Ltd - Better outlook warrants upgrade

• PAT met estimates, at Rs. 286 crore, rising 6.8% y-o-y. NIM fell 42/7 bps (y-o-y/q-o-q) to 18.47% (as a % of AUM).
• Credit cost rose 79/5 bps (y-o-y/q-o-q) to 1.6% as asset quality weakened. GS-3 rose 117/18 bps (y-o y/q-o-q) to 2.64%.
• AUM grew 17.6% y-o-y and 3.1% q-o-q. However, disbursements fell 4.4%/7.3% (y-o-y/q-o-q) on tighter underwriting. The management expect 25% AUM growth for FY26.
• AUM and PAT CAGR of 25% and 15%, respectively, expected over FY25-FY28, with healthy RoA/RoE at 6.8%/16.8% by FY28. We upgrade stock from Neutral to Buy with a revised PT of Rs. 750 on better outlook for the medium to long term and comfortable valuations. 

   Valuation (Consolidated)                                                                             (Rs. crore)   

Source: Company; Mirae Asset Sharekhan estimates

Quarterly Performance

Source: Company; Mirae Assets Sharekhan estimates

Actual/Estimates                                                                    (Rs. crore)

Source: Company; Mirae Assets Sharekhan estimates