Daishin Securities Co. said on the 4th that for Korea Investment Holdings, gains from the valuation of investment assets should continue to be reflected next year. It maintained a Buy rating and a target price of 218,000 won. The previous day's closing price of Korea Investment Holdings was 164,500 won.
Daishin Securities Co. said the market is concerned about whether Korea Investment Holdings can sustain its results after posting overwhelming earnings this year. Korea Investment Holdings recorded cumulative net income of 1.67 trillion won through the third quarter this year.
Researcher Park Hye-jin at Daishin Securities Co. said, "Because it is a cyclical industry with significant earnings volatility, it is hard to be definitive, but we judged the parts that led the performance were trading, and that, based on an analysis of the components, they are sufficiently sustainable."
By net operating revenue, the institutional sector results of Korea Investment Holdings show that interest revenue (1.17 trillion won) accounted for the largest share. The next contributor was trading revenue, which came to 850 billion won. Ultimately, Daishin Securities Co. said trading revenue was the institutional sector that drove the record-high results.
Trading revenue consists of valuation gains on investment assets such as bonds, financing, and investment banking (IB) assets. Daishin Securities Co. estimated that, this year on a securities-only basis, valuation gains reflected in trading revenue were 667.8 billion won.
Park said, "When estimating Korea Investment Holdings' results, while strengths such as IB, asset management, and brokerage are important, the outcome depends on how much valuation gains are reflected," adding, "The market's question is whether a similar level of valuation gains can be reflected next year."
She then said Korea Investment Holdings can smoothly reflect valuation gains next year as well. Park said, "On a standalone basis for Korea Investment & Securities, the status of investments in other companies shows a total of 6.9 trillion won across 456 investment asset items," adding, "This asset group is the list that will contribute to Korea Investment Holdings' valuation gains going forward, and given that valuation losses were recognized over the past three years of surging interest rates, there is a high likelihood that recognition of valuation gains driven by asset value increases will continue."
Through last year, Daishin Securities Co. estimated Korea Investment Holdings' normalized quarterly results level at about 300 billion won. Park said, "However, as the value of investment assets began to rise, this level increased, and 400 billion won per quarter is fully possible," adding, "Because a variety of investments are underway even now, this is a sustainable earnings level."
With results surging in 2025, dividends per share (DPS) are also expected to increase. Daishin Securities Co. forecast this year's DPS at 7,700 won, up 93.5% from a year earlier.
However, it noted that Korea Investment Holdings' dividend payout ratio remains in the 20% range, which is likely a concern for the company and many investors.
Park said, "Because there are no core affiliates outside securities, the company's capital has an inherent limitation in that, unless it raises capital or issues bonds, it can only increase by the amount of that year's profit," adding, "For a securities firm, capital is competitiveness and leads to profitability, so it is hard to indiscriminately raise dividends."
She added, "If there is a more certain investment destination than dividends, choosing growth from a capital efficiency perspective would be more favorable for long-term shareholder value."