This small-cap financials stock has received a BUY rating from 3 brokerages with a maximum upside of 33% over a 3-month period. The stock has continued to deliver consistent industry-leading financial results over the past quarters with other industry metrics showing improvements on a QoQ basis.
Fusion Microfinance Ltd (“Fusion”), unlike the weak industry trend in Q1 FY24, has delivered upstanding results – Net Interest income has grown 58.7% YoY from Rs. 186.2 crores to Rs. 295.5 crores. The company also reported outstanding Q1 profitability growth at 95.8% EBIT growth YoY from Rs. 120.2 crores to Rs. 235.4 crores, and their net profits growth stood at 60.2% YoY from Rs. 75.2 crores to Rs. 120.5 crores. In addition to that, the company is focusing on reducing its borrowings as its debt-to-equity ratio stands at 2.8 in FY23 compared to 4.32 in FY22.
Fusion also reported favorable expansions in key metrics in Q1 – yield on loans increased 200 bps YoY from 19.5% to 21.5%, the cost-to-income ratio improved from 44.7% to 36.3%, AUM grew 31.4% YoY from Rs. ~7,390 crores to Rs. ~9710 crores, ROA showed 100 bps expansion YoY from 4% to 5%.
Emkay Global Financial (“Emkay”) issued a target of Rs. 810 per share which represents an upside of approximately 35% from the current levels.
The brokerage supported its valuation with the rationale that the company has a proven track record of over a decade of navigating multiple credit and business cycles with resilience and processes capable and stable management also stated the valuation is driven by its expectation of growth from Fusion’s storing rural presence – 94% of AUM, and less exposure to states that are still impacting the industry due to covid-19.
Other growth drivers were stated to be an increase in ticket size for vintage customers and industry recovery as well as sustained expansion in its branches across geographies all of which are expected to drive absolute and margin expansion.
The company has below industry average P/E & P/B, over 14x growth in EPS YoY, and favorable volatility at 0.93. It has increasing volume averages and has YTD returns of 66%. It has a stable shareholding. Promoter pledges stand consistent at 2.36% and have seen a ~250 bps increase in FII/ DII holdings with a 150 bps increase in MF holdings alone in Q1 FY24. Fusion also enjoys favorable sentiment from the community and analysts.
Fusion is a non-banking financial company, that provides microfinance lending services to women entrepreneurs in rural and semi-urban areas in India. The company offers unsecured and secured business loans, and machinery loans, as well as small-value collateral-free loans through a network of 950+ branches. Fusion Microfinance Limited was incorporated in 1994 and is headquartered in Gurugram, India.
Written by Sandeep R
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
