[Click eStock] "NH Investment & Securities, Strong Q1 Performance... Low Burden from Optimus Provisions"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained its buy rating and target price of 15,000 KRW for NH Investment & Securities on the 7th.

According to Daishin Securities, the first-quarter net profit is expected to record 213.4 billion KRW, exceeding market expectations (191.9 billion KRW) by 11%. The average daily trading volume in the first quarter is projected to be 33.3 trillion KRW, a 21.2% increase compared to the previous fourth quarter, with brokerage fee net income expected to rise 80.6% year-on-year to 222.3 billion KRW.

Researcher Hyejin Park of Daishin Securities explained, “Although there was a significant trading loss in the first quarter of last year, normalization this year will lead to a substantial increase in net profit. Bond management income is expected to decrease due to increased interest rate volatility in March, but contrary to concerns, significant losses are unlikely to occur.”

While the bond management division is expected to incur slight losses, the income in January and February was larger than expected, so the related income decline will be limited. Currently, the bonds held by the company for management purposes amount to approximately 28 trillion KRW.

With acquisition financing for SK Shipping (1 trillion KRW) and co-lead management of SK Bioscience, acquisition fees and financial arrangement fees (25 billion KRW) are reflected, and multiple deals were executed in the IB division in March, so IB fee income is expected to be favorable. Since IB income has risen to the 80 billion KRW level since the third quarter of last year, a favorable trend is expected to continue this year as well.

Regarding the Optimus fund, the burden of provisions is expected to be minimal. The Dispute Mediation Committee recommended full compensation for two investors yesterday. Previously, the company had set aside 132 billion KRW as provisions last year, which is 30% of the retail sales amount of 380 billion KRW.

Researcher Park stated, “The Dispute Mediation Committee’s result is not binding, and the board resolution decided on an average prepayment rate of 45%, amounting to 180 billion KRW. Regardless of the committee’s result, the board will proceed with additional resolutions on the remaining compensation amount, but since the company is advocating for multilateral compensation with the Korea Securities Depository and Hana Bank, the likelihood of a prolonged dispute is high, so the possibility of a sudden provision burden is low.”