Securities Firm Achieves Record Quarterly Net Profit... Stock Price Has Yet to Respond

[Asia Economy Reporter Lee Seon-ae] Domestic securities firms achieved the largest-ever net profit in the first quarter of this year, but stock prices have yet to respond. The securities sector's stock prices have remained flat, and even on an individual stock basis, they remain at a disappointing level, prompting a flood of investment advice recommending 'overweighting.'

According to the Korea Exchange on the 4th, the Universe securities sector's stock prices in May showed a flat trend compared to April. Mirae Asset Securities was slightly down (-1.0%) compared to the previous month, Korea Financial Group showed weakness at -7.1% due to profit-taking following a sharp rise in April (31%), while Samsung Securities (11.3%) and NH Investment & Securities (2.3%), which have favorable foreign investor demand due to their low price-to-earnings ratios (PER), outperformed the market.

Considering the expectation of a domestic stock market rise in the second half of the year, experts believe it is necessary to take advantage of buying opportunities in the securities sector. A rise in the KOSPI means a rise in securities sector stock prices. Moreover, as the year-end approaches, the stock price growth rate of securities firms, which have relatively high dividend merits, is expected to accelerate. Although the overall sector has low expectations for dividends due to the nature of maximizing equity investments, approaching individual stocks can be a good investment alternative.

Shinhan Investment Corp. has given an investment opinion of 'overweight' for the securities sector and selected Samsung Securities and Korea Financial Group as top picks. Lim Hee-yeon, a senior researcher at Shinhan Investment Corp., said, "Samsung Securities' earnings per share (EPS) growth rate this year is 63.2%, and assuming a dividend payout ratio similar to last year (38.8%), this year's dividend per share (DPS) is 3,600 KRW, with a dividend yield approaching 8.0%, which is the highest among financial stocks." She added, "As the listing of KakaoBank approaches, the stock price momentum of Korea Financial Group is expected to become more distinct."

SK Securities researcher Koo Kyung-hoe also selected Samsung Securities as a top pick. He explained, "Samsung Securities is well positioned to respond to the high growth in the client asset management market, possesses diverse competitiveness across retail and IB, and has a high dividend payout ratio, making it suitable for dividend investment," adding, "The target stock price is raised by 10% to 64,000 KRW."

Meanwhile, the net profit of 57 securities companies in the first quarter of this year reached 2.9888 trillion KRW, an increase of 113.2% compared to the previous quarter (1.4018 trillion KRW). They earned more than half of last year's annual net profit in just three months this year, which is attributed to a surge in commission income due to an unprecedented stock market boom.

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