Earnings Stability Stands Out

The author is an analyst of NH Investment & Securities. She can be reached at yd.yoon@nhqv.com. -- Ed. 

 

KIH’s 1Q22 results beat consensus, led by its strong IB and stable trading divisions. Boasting a well-diversified set of financial affiliates, its earnings stability stands out amidst an unfavorable business environment. We maintain KIH as our top pick for the securities sector.

Successfully defending earnings amid high market uncertainties

We remain a Buy rating and a TP of W110,000 on KIH. We adhere to our existing earnings estimates, believing that it will achieve annual NP (excluding minority interests) of more than W1tn thanks to its strong fundamentals.

We anticipate further solid earnings in 2Q22, noting: 1) KIH proved its outstanding risk management capabilities in 1Q22 at a time when market uncertainties were maximizing; and 2) the relatively large size of the company’s IB domain acts as a strength. Economic slowdown and interest rate upcycle concerns are burdensome, but as a large securities player, KIH’s strong defensive capabilities should stand out.

1Q22 review: NP of W306.8bn (-23.6% y-y, +0.7% q-q)

KIH posted 1Q22 NP (excluding minority interests) of W306.8bn (-23.6% y-y, +0.7% q-q), exceeding consensus despite a lack of one-off profit items.

Securities: IB commission income upped to W155.9bn (+9% y-y), thanks mainly to the firm’s property PF segment. Trading & other businesses turned to the black, with positives including adept ELS and bond management, expansion of the balance of issued notes (W10tn), and dividend/distribution inflow.

Other subsidiaries: The impacts of subsidiaries’ capital increases (W50bn each for savings bank and capital, and W150bn for real estate trust) are becoming more visible. Spurred by active use of capital, NP rose significantly at the firm’s asset management (+122% q-q), savings bank (+171% q-q), and capital (+63% q-q) domains.

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