LS Securities on the 5th said it expects Kiwoom Securities to log positive results this year as its retail share rises on the back of KOSDAQ's surge. It raised its target price to 5.2 million won from 3.8 million won and maintained a "buy" recommendation. Kiwoom Securities' closing price in the previous trading day was 4.44 million won.
Kiwoom Securities posted controlling net profit of 246.6 billion won in the fourth quarter last year, slightly missing market expectations. Jeon Bae-seung, an analyst at LS Securities, said, "Despite a sharp increase in fee income, slower trading gains limited net operating revenue to a 5% increase from the previous quarter, and higher selling and administrative expenses due to performance bonuses reduced profit compared with the second and third quarters."
In addition, the savings bank subsidiary remained in the red, and results at the capital and asset management units also slowed, so consolidation net profit came in smaller than standalone net profit (256.4 billion won).
Jeon said, "That said, while maintaining a high quarterly return on equity (ROE) of 15%, full-year net profit last year grew 33% to 1.1 trillion won."
KOSDAQ's strong run is also a positive. Since the start of the year, the domestic market's average daily transaction value has exceeded 60 trillion won, sharply boosting brokerage fee revenue. Jeon explained, "Although the share of margin financing continues to fall as credit line limits are exhausted, retail market share is likely to rebound alongside the recent strength in the KOSDAQ market." Jeon saw Kiwoom Securities as a direct beneficiary of the government's policy to revitalize KOSDAQ.
As for trading gains and losses, a slowdown in bond-related gains is expected to continue from the fourth quarter last year, and in the IB institutional sector, opportunities to earn revenue from real estate project financing (PF) will inevitably shrink.
Jeon said, "Additional growth opportunities are proceeding in parallel through issued short-term notes and retirement pensions, and there will also be benefits from the activation of exchange-traded funds (ETF)."
Jeon added, "As the stock price level rises, shareholder returns are expected to expand with a focus on dividends rather than share buybacks and cancellations," naming it the top pick in the securities sector.