Mirae Asset Securities logo

Building a buffer against expected weakness in 4Q23

3Q23 review

For 3Q23, Kiwoom Securities reported net profit of W202.8bn (+64% YoY, +52% QoQ), beating the consensus by 31%. Brokerage commission income grew 5% QoQ on a rise in trading value, and interest income climbed 7% QoQ. Other operating losses narrowed significantly QoQ, following massive losses related to CFD receivables and real estate project financing (PF) in 2Q23. Trading income held up well despite volatile interest rates and equity markets.

Expectations outweigh worries

While Kiwoom Securities is likely to suffer losses in 4Q23 due to Youngpoong Paper-related losses, we believe this is already priced into shares. Looking ahead, the company should be among the biggest beneficiaries of increased market trading value amid the temporary short-selling ban (through 1H24). Other positives include the company’s plan to actively return capital to shareholders to restore investor confidence and its relatively low exposure to real estate PF (including overseas real estate). That said, we recommend closely monitoring changes in the firm’s brokerage market share. At a 12-month forward P/B of 0.48x, the stock looks undervalued in light of its robust profitability (2024F ROE of 13.9%).