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Motilal Oswal Report
We initiate coverage on Five-Star Business Finance Ltd. with a Buy rating and a target price of Rs 950 (based on 3.7 times FY26E price/book value).
The company operates in the micro-loan against property (backed by SORP) segment, where its business model has been enhanced for over two decades to deliver a combination of healthy loan growth and strong profitability.
Deep understanding of customer behavior, along with regional dynamics in semi-urban and fast-growing rural areas, position Five-Star well to remain dominant in this product segment.
The stock currently trades at 2.9 times FY26E P/BV. We believe that Five-Star's premium valuations will sustain in the medium term based on its niche market position, strong growth potential, superior underwriting practices, resilient asset quality, and high return metrics.
We estimate a profit after tax compound annual growth rate of ~23% over FY24- FY26 for an return on asset/return on equity of 7.2%/18.5% in FY26.
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