Research @ ResCon:

The Accumulated Net Profit summary of the Finance Company Group is given below.

Up to Q2 of 2064/65:                              Rs 359.54 million
Average Net Profit in Q2 2064/65:          Rs 6.66 million

Up to Q2 of 2065/66:                              Rs 984.36 million
Average Net Profit in Q2 2065/66:          Rs 18.23 million

Please note that the table below comprises of the figures for all the finance companies, both listed and not listed.

The unaudited Net Profit figures of Finance Company Group shows that finance companies, in general, performed well in Q2 of FY 65/66 as compared to the corresponding quarter of previous year. On an average, finance companies’ profit advanced by 174% this quarter. The group accumulated Rs 984.85 million in net profit this quarter compared to Rs 359.54 million net profit in the corresponding previous year quarter. Please check the table below for unaudited net profit/loss figures of the finance companies up to 2nd quarter.

The table above shows that Nepal Shree Lanka Merchant Bank performed exceptionally well and managed to record an impressive growth of 70187%. We can safely assume that Nepal Shree Lanka's growth in profit has played a biased role in pushing the overall change in net profit figure. Having said that, we can also see that most of the finance companies performed well. Altogether 28, out of 54 finance companies, have their net profit figures increment well over 50%. Thus from the analysis of profit figures of commercial banks, development banks and finance companies, it is evident that Nepalese service sector is performing well even during thes difficult times. Boom in realty sector, good inflow of remittance, increased exposure to hydropower sector, quality of loans (those not deemed "BAD") in portfolio, focus on SMEs are some of the key factors that have played vital roles in improving the profit figures of these banks.

ResCon Tip-Off:

We know that there exists a strong positive correlation between Earnings and Market Share Price figures. That is, if earnings’ figure of a company increases, the share price of the company increases too. But in case of the Nepalese finance companies, such a phenomenon is not being witnessed. In spite of better performance, the share prices of most of the finance companies are down.

To summarize, if you are someone who follows Warren Buffett, you will certainly know that the market price of a company must always address its fundamentals. In our case, there are some good finance companies which are currently undervalued. These banks’ share prices will definitely go up in the future. All you need to do is put on your thinking cap and choose the correct bank to invest in.

Well if you think you need some professional help, let us know.