![[Click eStock] "NH Investment & Securities, Securities Industry Faces Steep Challenges Next Year... Practically a Sell Recommendation"](https://cphoto.asiae.co.kr/listimglink/1/2018122814332049709_1545975200.jpg)
[Asia Economy Reporter Kwon Jae-hee] SK Securities downgraded NH Investment & Securities to a 'Neutral' rating on the 9th, lowering the target price from the previous 14,000 KRW to 10,000 KRW, effectively issuing a sell recommendation.
SK Securities stated that it adjusted its expectations for next year's stock market trading volume to below 20 trillion KRW per day on average, lowering brokerage revenue estimates across the securities sector.
Researcher Koo Kyung-hoe of SK Securities said, "Stock market trading volume has fallen to the pre-COVID-19 pandemic level of about 17 trillion KRW per day on average (combined KOSPI, KOSDAQ, and ETFs)," adding, "The trading volumes recorded in 2020-2021 are unlikely to serve as a benchmark for securities stocks for the foreseeable future." Accordingly, the expected average daily trading volume for 2023 was lowered from 23.3 trillion KRW to 18.1 trillion KRW.
In particular, the overall securities industry is expected to face a difficult period due to real estate project financing (PF) and liquidity securing challenges.
Researcher Koo said, "Securities firms recorded poor performance in the securities management division for two consecutive quarters in Q2 and Q3, and this trend continued for three consecutive quarters," adding, "This is also true for NH Investment & Securities."
However, although interest rates are expected to rise each quarter going forward, preventing continuous losses in securities management performance, it is anticipated that securities firms will incur bad debt expenses from real estate PF holdings, and profitability in the interest income segment may weaken during liquidity securing processes.
Researcher Koo explained, "We are lowering NH Investment & Securities' 2023 net income attributable to controlling shareholders forecast by 26% to 535 billion KRW and adjusting the target price from 14,000 KRW to 10,000 KRW," adding, "As a result, there is limited upside potential from the current stock price, so the investment rating is changed from Buy to Neutral."
He added, "However, as a large bank-affiliated firm, it is expected to be relatively less affected during the upcoming credit risk increase period."
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