From 6% to 56%! FIIs substantially upped their stake in this NBFC; check latest target price here
From 6% to 56%! FIIs substantially upped their stake in this NBFC; check latest target price here
An NBFC with a market capitalisation of Rs nearly 22,000 crore recently witnessed a substantial rise in stake by foreign institutional investors (FIIs) in the last one year. The latest shareholding data showed that FIIs held 56.06% stake in the company as of March 31, 2024. They held 6.58% in the same quarter last year. In fact, they continued to lap up shares in every quarter of FY24. This is Five-Star Business Finance, which recently posted a 39% rise in net profit at Rs 835.92 crore for the year ended March 31, 2024.
The net profit of the company grew nearly 40% in the recently concluded quarter (Q4FY24) to Rs 236.06 crore against Rs 168.88 crore in the same quarter a year ago. According to Nuvama Institutional Equities, Five-Star announced another strong quarter with Q4FY24 profit growing 40% YoY and 9% QoQ and both return on equity and return on assets improving on an already strong base. The brokerage has a ‘Buy’ rating on Five-Star with a target price of Rs 900. Shares of the company, which got listed on bourses in November 2022, have gained nearly 58% to Rs 748.70 on May 8, 2024 against the issue price of Rs 474.
“A secular shift from unorganised to organised lending and Five-Star’s strong collections are the key positives,” Nuvama said in a report.
JM Financial is also bullish on the company with a target price of Rs 1,020. “Five-Star business finance delivered yet another strong quarter with robust assets under management (AUM) growth (39.4% YoY, 7.9% QoQ) fuelled by healthy disbursements (20.4% YoY, 10.5% QoQ) and sustained profitability metrics (RoA at 8.36%, RoE at 18.6%),” JM Financial said.
It also added that given the Five-Star’s proven track record coupled with its unique positioning and deep understanding of its customer segment, the company is to maintain its growth trajectory and deliver on profitability and asset quality metrics with RoEs expected to reach 21.4% by FY26E.
Domestic mutual funds also increased their stake in the company to 3.85% as of March 31, 2024, against 1.04% in March 2023.
Sharekhan in its report on May 3 said that it sees a 16% potential upside in Five-Star Business Finance. It finds a long runway for growth in the untapped, niche, and fast-growing MSME segment in India. “New customer additions led by aggressive branch expansion, employee addition, improvement in branch vintage along with a strong risk framework would help the company to gain exposure to India’s financial inclusion story. The company remains a high-growth story and execution remains a key monitorable. A strong focus on collections and benign credit cycle is expected to support the earnings trajectory,” Sharekhan said.
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