Emkay's research report on Fusion MicroFinance
Fusion MFI continues to report strong earnings with PAT at Rs1.33bn and RoA at 4.7%, mainly led by continued margin expansion and higher fees. However, LLP remains elevated at 4.7%, primarily due to stress in the state of Punjab, specific PCR build-up, and incremental management overlay of Rs0.2bn. The management does not expect any further impact from Punjab, if the collection efficiency holds up at 75% and improves gradually in due course. Fusion MFI will continue to build management overlay, which now stands at 0.5% of AUM, to withstand any future asset quality disruption.
Outlook
Separately, Company plans to change its name to Fusion Finance from Fusion MFI, thus reflecting its portfolio diversification strategy. Factoring some growth moderation and asset quality noise amid the ongoing elections, we lower our target multiple to 1.7x FY26E ABV (earlier 2x Dec-25E ABV), thus arriving at a TP of Rs 700/sh (earlier Rs 750). We retain BUY.
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