Buy This Small Cap, NBFC Stock, Has Potential Growth Of 29.83% Suggests ICICI Securities

ICICI Securities believes that Fusion Micro Finance, a small-cap non-banking finance company (NBFC) stock can further surge by 29.83%. Recently the NBFC has posted a robust fourth-quarter performance.

As per ICICI securities research note, Fusion Micro Finance has continued to lead the industry in terms of profitability and growth - as reflected in its RoA and RoE sustained at >4% and >20% respectively in each of the 4 quarters of FY23 despite the creation of a provisioning buffer of Rs0.3bn in Q4FY23.

The key feature of Fusion's growth journey so far, including Q4FY23, has been its remarkably steady quarterly growth, unlike the industry trend of Q4 registering the highest growth. Further, Fusion has always focused on customer-led growth as reflected in 30% YoY expansion in its borrower base during Q4FY23, ICICI Securities highlighted.

The net borrower addition stood at 0.8 million during FY23. In Q4FY23, the customer base grew 4% QoQ leading to a robust 7% QoQ rise in AUM. In addition, the collection efficiency at 98% in Q4FY23 in the new book (comprising ~99% of MFI AUM originated post Mar'21), NNPL at

The total borrower base stands at 3.53mn as of Mar'23. Disbursements also remained strong at Rs23.7bn (up 8% QoQ) in Q4FY23 with average ticket size at >Rs40,000 (Rs36,800 in Q3FY23).

ICICI Securities added, "We maintain BUY with a revised target price of Rs650 (earlier: Rs600), implying 2x Sep'24E BVPS (Sep'23 BVPS earlier).

Stock Price Movement
The latest closing price of Fusion Micro Finance has rallied by 2.26% to Rs 504.55 per share on an intraday basis. The share price has surged up 55.29% since its listing in November 2022.

Disclaimer
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