SK Securities said on the 23rd that Kiwoom Securities(039490) is expected to post results in the second quarter this year in line with the consensus (market average estimate). However, it noted that market share in the brokerage business fell and the burden of the education tax increased. It maintained its investment opinion at "Buy," but cut the target price by 15.7% to 5 million won. Kiwoom Securities' previous day's closing price was 303,500 won.
SK Securities forecast Kiwoom Securities' second-quarter net income attributable to controlling shareholders at 509.3 billion won, up 64.4% from a year earlier. This is in line with the consensus.
Jang Young-im, an analyst at SK Securities, said, "Thanks to a buoyant stock market, brokerage and trading gains increased."
Brokerage fee income was estimated at 462.7 billion won, up 26.5% from the previous quarter.
Jang said, "As average daily transaction value increased, the quarter-over-quarter rise in brokerage fee income is likely to continue, but with the market led by large-cap stocks, Kiwoom Securities' market share appears to have declined from the previous quarter," adding, "Compared with the growth rate of market transaction value, the growth rate is likely to be somewhat lower."
Standalone trading gains were projected at 277.1 billion won, up 13.4% from the previous quarter. Jang said, "In addition to the exchange-traded fund (ETF) liquidity provider (LP) role, the contribution from proprietary investment (PI) is expected to be high," adding, "Gains from trading and valuation of equity-related securities likely remained solid, led by semiconductor stocks, and the relatively smaller bond impact compared with peers is also positive."
However, investment banking (IB) and other fee income was expected to have decreased 7.0% from the previous quarter as weakness in the IB institutional sector continued. Selling, general and administrative expenses were also expected to have increased 13.8% from the previous quarter, mainly due to higher costs such as the education tax.
Jang said, "Kiwoom Securities has commanded a premium within the industry as the No. 1 in brokerage market share with high cost efficiency," adding, "But with the recent large-cap-led market, brokerage share is on a downtrend, and in terms of the education tax, the ETF LP segment is a particular burden."
Kiwoom Securities has strength in ETF LP, but with the education tax expense burden larger than in the past, the factors to warrant a premium have somewhat weakened at this point.
Jang said, "A shortage in the retail margin lending limit is also continuing," adding, "It is positive that the company recently began a retirement pension business and is working to recover its market share, but we believe it is still at a stage where related results need to be watched."