Top Securities Pick
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Revise down TP by 10.0% to KRW99,000; Maintain BUY, top Securities pick
We cut our target price by 10.0% to KRW99,000 for Kiwoom Securities as we reflect downward revisions to: (1) daily average trading value for 2022E and 2023E of 8.6% and 10.1% (to KRW16.2tn and KRW15.0tn, respectively); and (2) sustainable ROE amid lower IB earnings. Our revised TP is based on 12m fwd BVPS of KRW182,432 and target P/B of 0.54x (sustainable ROE: 8.9%→8.0%, COE: 12.8%→11.9%, g: 3.3%). Despite the prospect of lower trading value, we maintain BUY, as: (1) brokerage interest income should fare well compared to rivals; and (2) profitability should also remain high compared to rivals given lower sensitivity to bond valuation gains/losses upon yield fluctuations. We expect 2022E and 2023E ROE of 11.1% and 12.8% (even after having revised down NP attributable to controlling interests by 19.8% and 19.6% to KRW490.5bn and KRW612.5bn).
3Q22E consolidated NP of KRW101.5bn, 39.2% below consensus
For 3Q22, we estimate consolidated NP attributable to controlling interests at KRW101.5bn (-6.4% QoQ), 39.2% below consensus. Despite a 19.8% QoQ plunge in daily average trading value, brokerage fee income should decline just 12.7% QoQ given higher exposure to income for overseas equities and derivative products. Brokerage interest income should fall just 7.6% QoQ due to lower margin loan balance for the market overall. While earnings are relatively insulated from higher bond yields, trading income and earnings from consolidated investment partnerships should still decline amid the stock market plunge since mid-September.