Five Star shares zoom 20% to hit new 52-week high after Q1 earnings

Shares of Five Star Business Finance surged as much as 20 per cent during the trading session on Monday after the company announced a strong performance in the June 2023 quarter. Even the brokerage firms tracking the stock continued to remain positive on the stock and see more steam left in the counter.

Five-Star Business reported a 32 per cent rise in the net profit on a year-on-year (YoY) basis to Rs 184 crore, while the growth came in at 9 per cent on a quarter-on-quarter (QoQ) basis. Assets under Management (AUM) grew by 43 per cent YoY to Rs 7,583 crore in Q1FY24.

Its revenue soared 42.2 per cent to Rs 480.4 crore from Rs 337.9 crore in Q1 FY23, while disbursements jumped 99 per cent YoY to Rs 1,132 crore during the same period, while the disbursements in the first quarter of ongoing fiscal nearly doubled to Rs 1,132 crore.

Shares of Five Star Business Finance were merely shy of its upper circuit limit on Monday, surging about 20 per cent to Rs 866.95, hitting its new 52-week high. The company was commanding a total market capitalization close to Rs 25,800 crore. The scrip had settled at Rs 724.65 on Friday.

Five Star Business Finance was listed on November 21, 2022, when the company raised about Rs 1,593 crore from its primary stake sale by selling its shares at Rs 474 apiece. However, its issue was subscribed only 70 per cent and the stock dropped over 5 per cent to Rs 448.20 on its maiden trading session. The stock has gained about 83 per cent from its issue price so far.

"Five Star delivered a fourth straight quarter of strong earnings in Q1FY24. AUM growth is led by branch expansion and increase in average ticket size due to inflation. While portfolio yield and CoF remained stable, NIM declined 73 basis points QoQ due to higher leverage," said Nuvama Institutional Equities.

"RoA remained strong at 8.4 per cent versus 8.6 per cent QoQ. RoE improved to 16.6 per cent from 16.4 per cent QoQ. We reiterate 'buy' given strong growth with improving asset quality. Management guided for higher AUM growth of 35 per cent and better asset quality," it added, revising up the target price to Rs 840.

Five Star reported strong performance in 1QFY24, with high growth and exceptional strength in early buckets. The company is all set for a strong year and upgraded its three-year guidance; topping-off of rates will provide room to cut rates that, though reduce margins, will help pick better customers and deal with competition, said Kotak Institutional Equities.

"We are raising our estimates by 3-11 per cent to reflect higher loan growth and expansion in spreads due to slower reduction of rates, offset by higher expenses. we assume a higher credit cost, in light of higher growth," it added, returning a 'buy' tag with a revised fair value at Rs 820 apiece, which was Rs 700 earlier.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)