[Click eStock] "Kiwoom Securities: Increase in Market Trading Volume Needed for Stock Price Reversal"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained its buy rating on Kiwoom Securities on the 20th but lowered the target price by 26% to 140,000 KRW.

The consolidated net profit for the first quarter was 141.1 billion KRW, down 46% compared to the same period last year. This was due to a significant decrease in brokerage commission revenue caused by a decline in stock market trading volume, a drop in the proportion of individual investors, and a decrease in market share. Operating losses also turned to a deficit of 32 billion KRW compared to the previous quarter. Corporate finance fees, which had contributed to earnings stability, also decreased by 18% compared to the previous quarter.

Researcher Eun-gap Kim of IBK Investment & Securities explained, “Since the main business sectors were generally sluggish, paradoxically, if certain business sectors improve in the second quarter, overall earnings improvement can be expected.”

From the perspective of brokerage commission fees, unfavorable market conditions continue. The average daily stock market trading volume in the first quarter decreased by 11.4% compared to the previous quarter and has been declining every quarter since the first quarter of last year. Compared to the same period last year, it dropped by 41%. The trading volume of individual investors is also on a downward trend, declining faster than the overall market. The proportion of individual trading was 63.8% on average in the first quarter, down 3.7 percentage points from 67.5% in the previous quarter. It has been continuously declining from the peak of 72.2% in the second quarter.

Researcher Kim explained, “Even in a situation where trading volume is decreasing, the number of accounts increased and market share was maintained to reduce the volatility of retail revenue, but in the past six months, the number of active accounts has decreased and market share has slightly declined.” The domestic stock market share in the first quarter was 19.9%, down from 20.5-22.2% this year. The overseas stock market share was 31.1%, recovering to the level of the first quarter of last year.

The consolidated net profit forecast for this year was lowered by 14.7% to 717.5 billion KRW. Researcher Kim said, “An increase in brokerage commission fees is a necessary condition for clear earnings improvement given the business structure,” adding, “An increase in stock market trading volume, such as through an index rise, is needed, so it seems time is required.”