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ICICI Securities Report
Five Star Business Finance Ltd. sustained strong growth momentum in Q2 FY24 with disbursement growing at 6% QoQ and assets under management at 9% QoQ.
We see upside risk to its full year FY24 growth guidance at 35% given addition of 70 new branches during Q2 FY24. It highlighted that southern India would remain a key focus market for near-term incremental growth.
Separately, Five Star Business would continue investing towards building distribution networks beyond the south to become a pan-India player over the medium to long term.
Notably, despite accelerated branch expansion, cost ratio remained in check.
Underlying asset quality trend remains healthy, reflecting in the 30-plus days past due further falling to 8.59% versus 9.7% QoQ and collections sustaining at 100% during Q2 FY24 with 98% of its customers paying EMI each month.
Maintain 'Buy' with an unchanged target price of Rs 860, valuing the stock at 4.5 times on Sep-24E book value per share.
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