FIVESTAR - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.1

📊 Financials Overview:

• Revenue & Profit Growth: PAT increased from 266 Cr. to 286 Cr. (↑ 6.79%), showing steady growth momentum.
• Margins: ROCE at 16.3% and ROE at 18.6% reflect strong profitability and efficient capital utilization.
• Debt Ratios: Debt-to-equity at 1.23 indicates moderate leverage, typical for NBFCs but worth monitoring.
• Cash Flows: Dividend yield at 0.35% is modest, offering limited income appeal.

💹 Valuation Indicators:

• P/E Ratio: 15.3 vs Industry PE of 21.2 → undervalued relative to peers.
• P/B Ratio: Current Price / Book Value ≈ 2.47, reasonable compared to sector norms.
• PEG Ratio: 0.46 → attractive valuation relative to growth.
• Intrinsic Value: Fair value estimated near 600–620 ₹; current price (571 ₹) offers accumulation opportunity.

🏦 Business Model & Competitive Advantage:

• Five-Star Business Finance operates as an NBFC, focusing on secured loans to small businesses and individuals.
• Strong niche presence in underserved markets provides competitive advantage.
• Efficient underwriting and risk management support profitability despite moderate leverage.

📈 Entry Zone & Long-Term Guidance:

• Entry Zone: Attractive accumulation range between 540–560 ₹.
• Long-Term Holding: Strong fundamentals and undervaluation make it suitable for long-term investors; leverage levels require monitoring.

Positive

• Healthy ROE (18.6%) and ROCE (16.3%) indicate strong capital efficiency.
• P/E ratio below industry average suggests undervaluation.
• DII holdings increased by 2.68%, reflecting domestic institutional confidence.
• Steady PAT growth quarter-on-quarter.

Limitation

• Debt-to-equity at 1.23 indicates moderate leverage risk.
• Dividend yield at 0.35% is low, limiting income appeal.
• FII holdings declined by -2.33%, showing reduced foreign investor confidence.

Company Negative News

• No major negative news reported; leverage and FII outflows remain key concerns.

Company Positive News

• Quarterly PAT growth of 6.79% highlights operational strength.
• DII holdings increased, showing domestic investor confidence.

Industry

• Industry PE at 21.2, higher than Five-Star’s 15.3, indicating relative undervaluation.
• NBFC sector growth driven by credit demand from small businesses and underserved markets.

Conclusion

⚖️ Five-Star Business Finance demonstrates strong profitability, efficient capital use, and undervaluation compared to peers. While leverage is moderate and dividend yield is low, the company’s niche focus and steady growth make it attractive for long-term investors. Accumulation is recommended near 540–560 ₹ for margin of safety, with potential upside toward intrinsic value levels.