[Click eStock] "Samsung Card, Surprise Q4 Earnings... Continued Market Share Expansion"

[Asia Economy Reporter Lee Jung-yoon] Hyundai Motor Securities announced on the 3rd that Samsung Card recorded an earnings surprise with a net profit of 129.4 billion KRW in the fourth quarter of last year, compared to the consensus estimate of 94.3 billion KRW. Hyundai Motor Securities maintained a buy rating and a target price of 48,000 KRW, citing strong operating revenue and lower-than-expected bad debt expenses as key factors.

Samsung Card's personal credit sales (new sales) amount increased by 23% year-on-year in the fourth quarter of last year, significantly surpassing the industry growth rate of about 13%. As a result, its market share expanded to 19%, up 0.3 percentage points from the previous quarter. Hyundai Motor Securities expects the market share growth trend to continue, approaching 20% by the end of this year.

Researcher Kim Jin-sang of Hyundai Motor Securities evaluated, "The active increase in product bonds will not only expand operating revenue in the fourth quarter but also promise a favorable volume effect this year." He added, "Bad debt expenses contributed to the strong performance due to excellent soundness indicators such as delinquency rates and a significant reduction in proactive year-end reserves compared to the previous year." He also noted, "Despite solid external growth, the annual increase rate of selling and administrative expenses was only 2.4%, indicating cost efficiency."

The expansion of Samsung Card's market share was analyzed to be driven by advantages in high-growth areas such as online shopping, department stores, automobile purchases, and fuel. Hyundai Motor Securities forecasts that the up-cycle of market share will continue as the number of card users and per capita usage amount increased by 5.8% and 16%, respectively, compared to the previous year.

Researcher Kim said, "The average new delinquency rate and over-30-day delinquency rate in the fourth quarter were 0.5% and 0.9%, respectively, maintaining the previous quarter's level, which is excellent." He added, "The bad debt expense ratio improved by 1.9 percentage points year-on-year to 2%, which is due to the conservative economic outlook and increased reserve rates in the fourth quarter of 2020, with an additional reserve of 120 billion KRW, whereas the additional reserve in the fourth quarter of last year was about 30 billion KRW."

Furthermore, Hyundai Motor Securities evaluated Samsung Card's dividend per share (DPS) of 2,300 KRW and dividend yield of 6.7% last year as excellent, with an estimated dividend yield of 7.8% also considered a strength.

However, Hyundai Motor Securities pointed out burdens such as ▲merchant fee rate reduction (estimated about 90 billion KRW) ▲strengthening of DSR and other household credit restrictions ▲rising funding costs, but expects these to be offset by steady volume effects and market share expansion. They also forecast a slight earnings growth cycle this year through efforts to improve cost efficiency, structural reductions in some expenses, and diversification of revenue sources.

Researcher Kim explained, "Due to the rise in market interest rates, funding costs are expected to be higher than the previous year." However, "Since 42% of funding is in bonds with maturities of over three years, mainly long-term bonds, the increase in funding costs is expected to be limited to around 10 basis points."

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