[Click eStock] "Korea Financial Group, Large Q1 Loss... Attractive in the Mid to Long Term"

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities evaluated on the 18th that although Korea Financial Group recorded a loss exceeding 100 billion KRW in the first quarter of this year due to ELS hedge operation losses, it is expected to recover profit levels from the second quarter onward, and remains the most attractive stock in terms of valuation in the mid to long term.

NH Investment & Securities diagnosed that Korea Financial Group posted a controlling shareholder net loss of 113.4 billion KRW in the first quarter of this year, significantly missing the market consensus of 9.7 billion KRW, resulting in an earnings shock.

Researcher Jeong Jun-seop analyzed, "The trading division recorded a loss of 285 billion KRW, and most of the loss appears to have occurred from ELS hedge operations." He explained that under favorable market conditions at the beginning of the year, the hedge operation balance increased from 4.1 trillion KRW at the end of last year to 4.6 trillion KRW at the end of March, and especially in ELS valuation, a volatility assumption with higher sensitivity to market changes than other companies was used, resulting in a large loss. He added that non-securities affiliates also performed poorly, including offshore funds with -36.9 billion KRW, the Hong Kong branch with -17.7 billion KRW, and Korea Investment Partners with -11.3 billion KRW. However, other divisions were generally evaluated as favorable.

Researcher Jeong viewed that although the first quarter recorded a large loss, the mid to long-term investment attractiveness remains high.

Researcher Jeong stated, "Broadly speaking, the large ELS operation loss in the first quarter is practically a one-time factor, and with the global stock market recovery since April, fund valuation losses and VC performance are expected to have substantially recovered. Moreover, the average daily trading volume has continued at the level of 15 trillion to 20 trillion KRW as of May, so an expansion in the profit contribution of retail revenue is anticipated."

He emphasized, "Although the profit forecast for this year has been revised downward, lowering the target stock price from 73,000 KRW to 65,000 KRW, the investment opinion remains 'Buy' considering the profit recovery outlook from the second quarter onward."

This content was produced with the assistance of AI translation services.