Target Price Raised to KRW120,000
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY, raise target price to KRW120,000; still industry top pick
We maintain BUY and raise our TP by 6.2% to KRW120,000 on Kiwoom Securities given the following:
(1) 4Q22 results confirmed a stable earnings stream due to low sensitivity of non-marketable asset valuation gains compared to that rivals.
(2) The firm is well-positioned to respond to a stock market rebound given its straightforward profit structure.
As such, Kiwoom Securities remains our top industry pick. Potential risk factors are industry-wide exposure to a slumping project financing market and lingering credit risk associated with PF. Our TP is based on KRW185,834 12m fwd BVPS and 0.62x target P/B (sustainable ROE: 8.0%; COE: 10.7%; g: 3.5%).
4Q22 consolidated NP (attributable to controlling interests) of KRW134.4bn (12.0% ROE; above market consensus by 14.5%)
4Q22 consolidated NP (to control. int.) of KRW134.4bn (-28.6% QoQ) beat the market consensus by 14.5% on the back of higher-than-expected trading income. Bond balance expanded from KRW8tn in 3Q22 to KRW12tn in 4Q22, boosting trading interest income to KRW46.3bn (+94.4% QoQ). Despite principal investment valuation losses amid the stock market downturn, FX and bond valuation gains were managed quite well. In addition, an increase in interest rates for customer deposit trusts partially offset a decrease in brokerage interest income resulting from lower credit extension balance and customer deposits. Brokerage fee income slid 8.3% QoQ on a decline in trading value. IB/other commission income fell 55.3% QoQ, weighed down by fewer PF deals. As for consolidated subsidiaries, OP at Capital/Savings Bank dropped 48.2% QoQ/79.1% QoQ. Earnings from consolidated investment partnerships were sluggish because of burdensome provisions.