Target Price Raised 14.1% to KRW113,000
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY; raise target price 14.1% to KRW113,000; still industry top pick
We maintain BUY and raise our TP by 14.1% to KRW113,000 on Kiwoom Securities given that (1) the firm’s sensitivity to earnings from assets in 4Q22 is expected to be lower than that of rivals and (2) immediate uncertainties related to individual investors have dissipated, as income taxes on financial investment have been suspended for two more years. This year, Kiwoom Securities' straightforward profit structure should be considered an advantage amid high interest rates, the economic slowdown and asset price volatility. As such, Kiwoom Securities remains our industry top pick. We raise our TP based on (1) an adjustment to 2023 ERP (7.16%→5.41%) and (2) a lowered valuation discount following the government’s announcement of measures to assist in real estate project financing. Our TP is based on KRW185,567 12m fwd BVPS and 0.6x target P/B (sustainable ROE: 8.0%; COE: 11.9%→10.8%; g: 3.3%). We estimate end-2022 DPS at KRW1,800.
4Q22 forecast: Consolidated NP at KRW119.3bn, in line with market consensus
We forecast 4Q22 consolidated NP at KRW119.3bn (-3.4% QoQ, -36.6 YoY), which is in line with the market consensus. We estimate brokerage income to decline 3.8% QoQ on decreases in individual investors’ trading value and margin loan balance. IB/other income, which fell sharply in 3Q22, should increase 1.8% QoQ. Trading & financial product income should increase 33.8% QoQ on the back of the recovering stock market. Still, standalone NP should decline 15.5% QoQ, as we expect SG&A to increase 12.0% on accumulated year-end incentives. Kiwoom Capital (subsidiary) earnings, which plummeted in 3Q22, should see a delay in recovery due to contraction in real estate finance, but consolidated NP should decline only 3.4% QoQ on improved trading income and earnings from consolidated investment partnerships.