Why Is the Target Price Being Lowered Despite Prospects of Joining the 1 Trillion Won Club in the Securities Industry?

Operating Profit of 5 Securities Firms Expected to Reach 1 Trillion Won
Upward Trend Since COVID-19 Breaks
Next Year's Profit Forecasted to Decrease Compared to This Year

[Asia Economy Reporter Park Jihwan] This year, a total of five securities firms are expected to achieve annual operating profits of 1 trillion won. Although brokerage commission income, which had driven performance, has sharply declined due to a drastic drop in trading volume by Donghak Ants, the diversification into investment banking (IB) and other businesses is bearing fruit. However, despite the record-breaking performance of securities firms, target stock prices are beginning to be revised downward amid concerns that earnings have peaked.

According to financial information provider FnGuide on the 15th, the annual operating profits of Korea Financial Group, Mirae Asset Securities, NH Investment & Securities, Samsung Securities, and Kiwoom Securities are projected to reach 6.5996 trillion won this year. This represents a 49.7% increase compared to 4.4078 trillion won during the same period last year.

Mirae Asset Securities, which surpassed 1 trillion won in operating profit for the first time in the industry last year, is expected to post profits of 1.4648 trillion won this year. Korea Financial Group (1.466 trillion won), NH Investment & Securities (1.2904 trillion won), Samsung Securities (1.2471 trillion won), and Kiwoom Securities (1.1313 trillion won) are also expected to enter the 1 trillion won operating profit era for the first time.

As inflation concerns and base rate hikes increased stock market volatility, trading volume by Donghak Ants sharply declined, causing a significant drop in brokerage commission income, the main source of revenue. However, this is interpreted as a result of expanding business focused on corporate finance such as IB. According to Korea Investment & Securities, the brokerage commission income ratio of Mirae Asset Securities, Samsung Securities, NH Investment & Securities, and Kiwoom Securities is expected to account for 32.5% of total operating revenue this year, down significantly from 37.0% last year. On the other hand, the asset trading segment, which has shown the most remarkable growth this year, is expected to increase substantially from 13.8% of total operating revenue last year to 21.6% this year.

However, despite this favorable performance in the securities industry, target stock prices for securities stocks are declining. The upward trend, which has continued with record-high earnings since the COVID-19 outbreak, is expected to break from the third quarter. The estimated operating profit for these five securities firms in the third quarter of this year is 1.5005 trillion won, an 8.6% decrease from 1.6413 trillion won in the same period last year. Annual profits next year are also expected to decline compared to this year due to base effects and a slowdown in brokerage indicators. On the 13th, KB Securities lowered the target price for Kiwoom Securities by 12.6%, citing a significant impact from decreased trading volume profits. Target prices were also lowered simultaneously for Korea Financial Group (-12.1%), Samsung Securities (-4.5%), Mirae Asset Securities (-10.4%), and NH Investment & Securities (-6.7%).

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