Growing Uncertainty for Investment Assets Burdensome

The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.      

 

Downgrade to HOLD; cut target price 25.0% to KRW7,500         

We downgrade Mirae Asset Securities to HOLD, as we cut our TP by 25.0% to KRW7,500. If the economic slowdown deepens and asset price volatility rises, (1) volatility in valuation gains/losses for investment assets (e.g., real estate, pre-IPO stocks) should rise and (2) earnings fluctuations at overseas investment companies will likely increase amid slumping global stock/bond markets. Equity purchases by Mirae Asset Capital should help stabilize the stock price, but (3) growing uncertainty for investment assets should be burdensome, especially for Mirae Asset Securities, which has more exposure to Mirae Asset Capital than rivals. Our TP represents KRW18,296 12m fwd BVPS, 0.41x target multiple (sustainable ROE: 6.4%→6.0%, COE: 9.4%→10.0%, g: 3.1%). 

Revise down 2022E NP to control. int. by 10.3% to KRW758.2bn   

We lower 2022E NP attributable to controlling interest by 10.3% to KRW758.2bn to reflect our sluggish 2Q22 earnings outlook, 2022E/2023 daily avg. trading assumptions, which were lowered to 8.2%/16.8%, and 2022E/2023E trading profitability, which were revised down to 0.6% (-0.3pp)/0.7% (-0.1pp).   

2Q22 forecast: Consolidated NP (to control. int.) to miss market consensus; expect deteriorating trading income to be partially offset by revaluation for non-marked-to-market assets 

We forecast 2Q22 consolidated NP (to control. int.) at KRW163.7bn (-14.6% QoQ), which is below the market consensus by 29.2%. Trading & product income should plunge 75.6% QoQ amid interest rate hikes and stock market pullbacks. Brokerage income should fall 4.9% QoQ on lighter trading value. Mirae Asset Securities plans to revalue non-marked-to-market assets in 2Q22, much like it did in 1Q22, and we expect consolidated earnings to partially offset deterioration in standalone trading & product income. 

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution