Earnings Stability Enhanced
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain Buy and TP of KRW153,000
We maintain BUY on Kiwoom Securities and our TP of KRW153,000, given the following:
(1) Valuations are compelling thanks to robust profitability despite investor concerns.
(2) Earnings stability has been enhanced by the diversification of its standalone-basis profit structure and an increasing earnings contribution from consolidated subsidiaries.
Concerns are mounting that the downtrend in daily average trading value resulting from a decrease in direct investments by retail investors may depress commission income. In addition, the introduction of mobile trading systems by Toss Investment and Kakaopay Securities may erode Kiwoom Securities’ retail market share. However, these worries are excessively reflected in valuations, in our view, as the company has maintained competitiveness even after Toss Investment’s mobile trading system launch and as Kiwoom Securities’ trading value remains high despite the recent downtrend. Trading at a P/B of 0.65x (based on end-2022E BVPS), the stock appears undervalued considering 2022E ROE of 17.7%. Our TP is based on 12m fwd BVPS of KRW170,774 and a target multiple of 0.91x (sustainable ROE: 10.3%, COE: 10.8%→11.1%, TGR: 2.3%).
4Q21E consolidated NP of KRW177.7bn (-23.6% QoQ), 6.1% above consensus
We expect 4Q21E consolidated NP (attributable to controlling interests) to decline 23.6% QoQ to KRW177.7bn, 6.1% above consensus. We anticipate consensus-beating results, given: (1) relatively less exposure to the bond yield uptrend than its peers; and (2) higher fees from overseas equities and derivative products, offsetting the decline in domestic trading value. Meanwhile, IB earnings, which were robust in 3Q21, should contract in 4Q21 due to unfavorable seasonality. Trading and financial product income should plunge QoQ due to a high comparison base resulting from valuation gains on investments in pre-IPO and unlisted stocks in 3Q21.