2Q22 Preview: Earnings to Arrive Sluggish
The author is an analyst of NH Investment & Securities. She can be reached at yd.yoon@nhqv.com. -- Ed.
We lower our TP on Mirae from W11,000 to W8,000, reflecting cuts to our earnings estimates for the firm’s major revenue sources. But, we stick to a Buy rating, anticipating that the firm will further beef up its shareholder return policies by yearend. Given the difficult industry environment, domestic and overseas earnings for 2Q22 are to arrive tepid.
Maintain Buy rating, but lower TP from W11,000 to W8,000
We maintain a Buy rating on Mirae Asset Securities (Mirae), positively viewing its continual implementing of shareholder-friendly return policies. But, we lower our TP from W11,000 to W8,000 due to: 1) a 22% cut to 2022E EPS to reflect sluggish earnings at the company’s brokerage and trading/other divisions amid a market slowdown; and 2) a change in risk-free interest rate assumption (to 2.5%) for calculating our target P/B.
Looking at the near term, we expect Mirae to be active in beefing up its shareholder return policy. The company completed a 10mn shares treasury stock buyback program in April, and Mirae Asset Capital, the largest shareholder, recently announced that it will purchase 13.9mn common shares (2.9% of overall outstanding shares). Assuming that management adheres both to the previous year’s level of return rate (31.3%) and the ratio between cash dividends and treasury stock cancellation, we see room for additional treasury stock buybacks and cancellations in 2H22.
2Q22 preview: Earnings to arrive sluggish
We estimate 2Q22 consolidated NP (excluding minority interests) of W180.2bn (-47.6% y-y, -6.0% q-q). High price volatility for overall investment assets (including stocks) is a negative factor for the firm’s domestic and overseas corporate operations. Reflecting gains from revaluation of some non-marketable assets, the slump in the company’s core securities business should be somewhat offset, but y-y and q-q declines look inevitable.
IB: We size 2Q22 fee income at W73.6bn (+9.9% y-y). Traditional IB income should prove flat q-q, but the real estate PF division appears to be doing well. Like other large companies, residential and commercial real estate PF performance is expected to protect profit figures.
Trading/other: We size 2Q22 trading/other division income at W74.6bn (-78.2% y-y), summing losses on bond valuations and revaluation gains for non-marketable assets. But, it is questionable whether large-scale revaluation gains of non-marketable assets can be secured in the future as the market slowdown is prolonged.