Kiwoom Securities
The author is an analyst of NH Investment & Securities. She can be reached at yd.yoon@nhqv.com -- Ed.
For 1Q23, Kiwoom should report a significant jump in retail-related revenue, thanks to active stock trading by individual investors. In addition, PF provisioning should prove limited. Expecting it to remain the safest play this year in terms of earnings, we adhere to Kiwoom as our sector top pick.
Benefiting from increased trading volume
Since the beginning of the year, individual investor transactions have been on the rise, especially in certain industries, and Kiwoom Securities is expected to be a main beneficiary of this trend. Recently, average daily transaction amount in Korea has expanded to W25tn (vs W40tn during Covid-19). It remains to be seen whether the recent uptrend in transactions will continue throughout the year, but it is clear that Kiwoom is benefitting.
We raise our TP from W120,000 to W140,000 on: 1) a 24.1% hike to 2023E EPS; and 2) a change in the base period for average three-year ROE to 2023E~2025F.
1Q23 preview: Brokerage and PI booming alongside index rebound
We expect Kiwoom to report 1Q23 NP (excluding minority interest) of W200.3bn (+42.1% y-y, +49.0% q-q), exceeding both our previous estimate and consensus. Compared to end-2022, index-linked business has strengthened thanks to the stock market rebound and improvement in investment sentiment.
Brokerage: Commission income is estimated at W134.1bn (+4.3 y-y, +25.9% q-q). In Korea, average daily trading value in 1Q23 came to W17.3tn (vs W19.4tn in 1Q22, W12.8tn in 4Q22). Although its overseas stock brokerage market share declined slightly q-q, Kiwoom continued to rank first in domestic and foreign derivatives.
IB: IB fees are sized at W28.5bn (-30.0% y-y). We attribute the y-y decline to a scaling back of business in order to manage real estate PF-related risks. However, the corporate financing environment has improved, and DCM bond issuance has been brisk. IPOs included Sands Lab and Kumbi.
Trading/other: 1) Bond management business likely proved sound, as in 4Q22; 2) the PI business should report a turn to profit of about W40bn (vs -W35.7bn in 1Q22, -W6.4bn in 4Q22), in line with the market rebound; and 3) we anticipate the reflection of dividend income of W26.5bn from Woori Financial Group holdings (WFG DPS: W900 in 2021, W1,130 in 2022).