Buy Fusion Micro Finance; target of Rs 810: Emkay Global Financial

Emkay Global Financial's research report on Fusion Micro Finance

Fusion MFI reported in-line PAT of Rs1.3bn/~5% RoA in Q2FY24, mainly on the back of healthy margins and higher ‘other income’, and partly offset by an elevated LLP (3.8% of loans). The company has received the first tranche of recovery from the Assam loan relief scheme (of Rs50mn) and should see further recovery going ahead. The management expects slippages/credit cost to remain elevated in the near term due to seasonality factors and its new aggressive write-off policy, but should start normalizing 4Q onwards.

Outlook

Factoring-in a better margin/fee income delivery, partly offset by a higher LLP, we revise FY24-26E earnings estimate by 2-4% and expect Fusion to report a strong RoA/RoE of 4.7-5.1%/20-21%, respectively. Hence, we retain our target price at Rs810/share, valuing the stock at 2.1x its Sep-25E ABV and maintain our BUY rating.