[Click eStock] "NH Investment & Securities, Private Equity Fund Costs Reflected and Stock Market Boom Raise Earnings Expectations"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained its buy rating on NH Investment & Securities on the 29th and kept the target price at 15,000 KRW. This decision was based on the assessment that the private equity fund costs had been pre-reflected, resolving negative factors, and that balanced business portfolios are expected to drive profit growth this year.

In the fourth quarter of last year, NH Investment & Securities recorded a controlling net profit of 75.6 billion KRW, about 43% below market expectations. Baek Doosan, a researcher at Korea Investment & Securities, stated, “Despite a favorable operating environment, it is estimated that costs of 216.2 billion KRW occurred due to private equity fund loss compensation and provisions for overseas alternative investment assets,” adding, “Other business segments met the high performance expectations driven by the stock market boom.”

Brokerage revenue was 174.6 billion KRW, down 8% from the previous quarter, but is expected to rebound in the first quarter of this year. Financial product sales commissions were 19.9 billion KRW, decreasing 7%, mainly due to fund-related income.

Corporate finance (IB) fee income increased by 19% to 96.5 billion KRW, centered on debt guarantee-related deals. Operating profit and related interest income were 202.8 billion KRW, down 34% from the previous quarter when stock and bond operations were strong, but up 20% compared to a year ago. Interest income related to loans was 58.4 billion KRW, 5% higher than the previous quarter due to increased customer deposits and credit extensions.

Researcher Baek Doosan explained, “Although the fourth-quarter performance was sluggish, it is important to note that most of it was affected by conservative cost recognition,” and added, “With these factors disappearing this year, net profit is expected to grow 7% year-on-year to 618.4 billion KRW.”

The stock price has been sluggish for a long time due to the private equity fund issue. Despite an expected return on equity (ROE) of 10.7% this year, the price-to-book ratio (PBR) is currently 0.06, making it the most undervalued among securities stocks. Researcher Baek said, “Considering that private equity fund costs have been pre-reflected and negative factors resolved, as well as the balanced business portfolio between brokerage and IB, we maintain it as the top preferred stock in the sector.”

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