ICICI Securities research report on Fusion Micro Finance
Fusion Microfinance (Fusion) continues to deliver industry-leading profitability in Q1FY24- as reflected in it sustaining ~5% RoA and >20% RoE during the past 5 quarters. This is an outcome of its diversified operations with no single state contributing >20% of AUM, rural portfolio accounting for 93%, quality underwriting, proactive risk management and deep understanding of demographics in states where it operates. Disbursements fell by only 4% QoQ vs >20% for peers. Overall, AUM grew 4% QoQ, equally driven by new customer addition and ticket-size increase. While it continued to invest towards distribution expansion (opened >130 branches in the past 1 year), productivity improvement (AUM per branch increased to INR 90mn in Q1FY24 vs 78mn in Q1FY23) led to costincome ratio remaining stable at 36%.
Outlook
Maintain BUY with a revised target price of INR 800 (earlier INR 650) as we now value at 2.5x Sep’24E BVPS vs 2x earlier given improved visibility on it sustaining 20% RoE in neat term.
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