FIVESTAR - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.0

📊 Financial Overview: Five-Star Business Finance Ltd (FIVESTAR) has a solid market cap of ₹19,225 Cr and demonstrates strong profitability with ROE at 18.6% and ROCE at 16.3%. The company posted a PAT of ₹286 Cr this quarter, up from ₹266 Cr, reflecting a 6.79% profit growth. The debt-to-equity ratio of 1.23 is typical for NBFCs and remains within a manageable range.

💹 Valuation Metrics: The stock trades at a P/E of 17.4, below the industry average of 22.6, suggesting undervaluation. With a Book Value of ₹231, the P/B ratio is ~2.83. The PEG ratio of 0.52 indicates attractive valuation relative to growth. Dividend yield is modest at 0.32%.

🏦 Business Model & Competitive Advantage: FIVESTAR operates as an NBFC focused on small business and retail lending, primarily targeting underserved segments. Its granular loan book, strong underwriting practices, and high-yield lending model offer a durable competitive edge. The company benefits from deep regional penetration and low delinquency rates.

📈 Technical Indicators: RSI at 80.5 suggests overbought conditions, indicating potential short-term correction. MACD at 11.2 shows strong bullish momentum. The stock is trading above both its 50 DMA (₹560) and 200 DMA (₹644), reflecting medium-term strength. Volume is significantly above average, signaling strong investor interest.

🎯 Entry Zone: A more attractive entry point would be around ₹600–₹620, offering a better margin of safety below current levels and closer to technical support.

🕰️ Long-Term Holding Guidance: FIVESTAR is a fundamentally strong NBFC with high returns and a focused lending strategy. Long-term investors can consider accumulating on dips for steady growth and financial sector exposure.

✅ Positive

• Strong ROE (18.6%) and ROCE (16.3%) reflect efficient capital deployment.
• PEG ratio of 0.52 suggests undervaluation relative to growth.
• EPS of ₹37.6 supports consistent earnings performance.
• DII holding increased by 2.68%, indicating domestic institutional confidence.

⚠️ Limitation

• RSI at 80.5 indicates overbought territory, suggesting short-term caution.
• Debt-to-equity ratio of 1.23 is typical but should be monitored.
• Dividend yield of 0.32% may not appeal to income-focused investors.

📉 Company Negative News

• FII holding declined by 2.33%, signaling reduced foreign investor sentiment.

📈 Company Positive News

• Quarterly PAT increased by 6.79%, indicating operational strength.
• Stock has gained 43.4% from its 52-week low of ₹501.

🏭 Industry

• NBFC sector benefits from rising credit demand and financial inclusion initiatives.
• Industry P/E of 22.6 reflects moderate valuation across peers.

🧾 Conclusion

• FIVESTAR is a well-managed NBFC with strong returns and focused lending strategy.
• Valuation is attractive; consider accumulating near ₹600–₹620.
• Ideal for long-term investors seeking exposure to high-yield retail lending.