Guheshwori Merchant Bank & Finance Q4 Results: Revenue Declines but Net Profit Improves

Guheshwori Merchant Bank & Finance Ltd. (GMFIL) has published its audited financial results for the fourth quarter of FY 2024/25, showing a significant decline in revenue but a turnaround in profitability compared to the deep losses earlier in the year.

The company reported a total revenue of Rs. 748.67 million in Q4, down 30.70% year-on-year compared to Rs. 940.54 million in Q4 of FY 2023/24. Sequentially, revenue fell from Rs. 588.45 million in Q3, continuing the downward pressure seen throughout the fiscal year.

The gross profit stood at Rs. 173.05 million, delivering a margin of 23.11%, slightly lower than 23.77% in Q3 but higher than the 18.72% margin in Q4 of last year. This indicates the company has improved its cost efficiency even as revenue contracted.

On the earnings side, GMFIL posted a net income of Rs. 27.96 million in Q4, an improvement from Rs. 15.49 million in Q4 last year but lower than Rs. 32.49 million in Q3. Importantly, this is a recovery from the heavy net loss of Rs. -113.37 million in Q1. The net profit margin stood at 3.73%, compared to 5.52% in Q3 and 1.65% a year ago.

Return indicators showed mixed signals. Return on Assets (ROA) stood at 0.28%, down from 1.04% in Q3 but higher than 0.16% last year. Return on Equity (ROE) came in at 1.89%, lower than 7.08% in Q3 but still an improvement from 1.09% a year ago.

On a per-share basis, EPS (annualized) stood at Rs. 2.76, better than Rs. 1.53 last year but weaker than Rs. 4.28 in Q3. The reported PE ratio stood at 182.79, indicating the stock trades at a very high valuation relative to its current earnings.

From a balance sheet perspective, the book value per share was Rs. 153.63, while the market value per share traded at Rs. 504.87, over 3.2 times book value, showing investor confidence despite modest profitability.

Financial Sector Indicators

• Capital Fund to RWA stood at 15.98%, down from 18.14% last year but still above the regulatory minimum.

• NPL ratio improved to 6.16%, down from 6.93% in Q3 and significantly better than the 13.56% recorded in Q1, reflecting improved asset quality.

• Loan loss provisioning coverage rose to 87.84%, compared to 64.03% last year, showing stronger buffers against defaults.

• Cost of funds decreased to 6.15%, compared to 8.32% last year, improving funding efficiency.

• Base rate dropped to 8.62%, from 10.85% a year ago, easing lending rates.

• Net interest spread improved slightly to 4.59%, up from 4.09% in Q4 last year.

• Net liquid assets stood at 37.49%, showing comfortable liquidity, in line with past levels.

Dividend has not yet been declared for FY 2024/25.