Forget the 'Earnings Shock'... Kiwoom Securities Projects Q2 Operating Profit to Double Year-on-Year

Increased Market Liquidity Benefits Donghak Ant Movement
Stock Price Surges to 95,900 Won This Month, Up 16.24%
Q2 Earnings Estimates Rise Compared to 3 Months Ago

[Asia Economy Reporter Oh Ju-yeon] Securities stocks are showing strength on expectations of improved second-quarter earnings. In particular, Kiwoom Securities, which recorded an 'earnings shock' in the first quarter, is expected to see its operating profit in the second quarter increase by more than 100% compared to the same period last year, causing its stock price to surge this month. Compared to three months ago, the operating profit estimates have also increased, contrasting with other securities firms whose earnings forecasts have been revised downward.

According to financial information provider FnGuide on the 5th, Kiwoom Securities is the only company expected to see an increase in second-quarter earnings compared to the same period last year. The consensus operating profit estimates for five domestic securities firms?NH Investment & Securities, Samsung Securities, Korea Financial Group, Mirae Asset Daewoo, and Kiwoom Securities?forecast a total of 789.5 billion KRW for the second quarter of this year.

This figure represents an 11.56% decrease compared to the early March estimate before the spread of COVID-19 (892.7 billion KRW) and a 10.84% decline compared to the same period last year (885.5 billion KRW).

However, Kiwoom Securities' operating profit, which was 65.3 billion KRW in the second quarter of last year, is expected to rise to 132.4 billion KRW this year. This is a 102.8% increase year-on-year and 21.2% higher than the 109.3 billion KRW forecasted in early March. This contrasts with the other four securities firms, all of which have seen their operating profit estimates fall by 13-17% compared to three months ago.

Despite the prolonged impact of COVID-19, the government's swift liquidity provision and a surge in trading volume have helped securities firms recover their earnings. Kiwoom Securities, which has a strong brokerage division, is widely regarded as having benefited from the 'Donghak Ant Movement' (retail investor rally).

Kim Do-ha, a researcher at Cape Investment & Securities, said, "Kiwoom Securities is the securities firm that benefits the most from the increase in stock trading volume and the recovery of credit loan balances." He added, "The stock market trading volume in the second quarter is expected to increase by 24% compared to the previous quarter, and the balance of credit loans, which decreased due to forced sales in the first quarter, is expected to increase by 50%. This is expected to positively impact Kiwoom Securities' earnings." He also noted that among the 128 billion KRW in product operation losses that caused the earnings shock in the first quarter, 128 billion KRW was due to stock valuation losses, but with the recent rise in the KOSPI, valuation gains are expected to recover.

Kiwoom Securities' stock price has surged this month. It rose sharply by 16.24% over four trading days, from 82,500 KRW on the 1st to 95,900 KRW intraday on the 4th.

However, some analysts caution that while the second-quarter earnings recovery due to the stock market rebound in April and May, the surge in new individual accounts, and increased trading volume may be advantageous, these factors could be temporary. Therefore, excessive expectations for brokerage earnings should be avoided.

Gu Kyung-hoe, a researcher at SK Securities, said, "Although Kiwoom Securities' second-quarter earnings recovery is expected, it is difficult to say that the company's value has improved compared to before COVID-19." He added, "The surge in trading volume may be temporary, so we maintain the existing target price of 80,000 KRW."

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