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ICICI Securities Report
Breaking the seasonality, Five Star Business Finance Ltd. has reported strong Q1 FY24 operating performance, especially, on growth and asset quality fronts– assets under management grew robust 10% QoQ even in a seasonally weak quarter and 30 plus days past due fell to a multi-year low of 9.7%.
Spread improved 20 basis points QoQ driven equally by an increase in asset yields and a decline in the cost of funds (down 10 bps QoQ).
Credit rating upgrade in Q1 FY24 and incremental borrowing cost at 9.2% (blended cost of fund at 9.8%) improve visibility on better trajectory in spread to continue in coming quarters.
Given very strong growth momentum in Q1 FY24, management has raised its full year FY24 growth guidance to 35% versus 30% earlier.
Maintain 'Buy' with a revised target price of Rs 860 (Rs 765 earlier), valuing the stock at 4.5 times on Sep-24 book value per share versus four times earlier.
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