[Click eStock] "DGB Financial Group, Q2 Earnings Expected to Fall Short of Estimates... Target Price Down"

Target Price Revised Downward by 3.3% Compared to Previous Level

On the 26th, IBK Investment & Securities downgraded the target price of DGB Financial Group from 9,000 KRW to 8,700 KRW, citing that the company's second-quarter earnings this year are expected to fall significantly short of market expectations. The investment rating was maintained at 'Trading Buy.'

Woo Do-hyung, a researcher at IBK Investment & Securities, explained, "The target price was lowered by 3.3% compared to the previous level due to the reflection of provisions related to real estate project financing (PF) by the securities subsidiary, which lowered the return on equity (ROE). Although concerns over real estate PF are expected to gradually ease after the second quarter, positively impacting the stock price, the investment rating is maintained due to delays in strengthening shareholder return policies following the transition to commercial banks."

The second-quarter earnings are expected to significantly underperform the consensus (average forecast by securities firms). Researcher Woo said, "DGB Financial Group's second-quarter net income attributable to controlling shareholders is expected to decrease by 63.3% year-on-year to 52.1 billion KRW, falling 55.7% short of the consensus of 117.7 billion KRW. This is due to the anticipated large-scale provision accumulation by the securities subsidiary in the second quarter, and the annual provisions related to real estate PF by the securities subsidiary are expected to increase compared to the previous year."

However, since the provisions are expected to be most heavily reflected in the second quarter and gradually decrease thereafter, related concerns are expected to be gradually resolved. Researcher Woo forecasted, "The group's provision accumulation in 2024 is expected to be around 650 billion KRW, exceeding the 606.8 billion KRW in 2023, and the credit cost ratio (CCR) is also expected to rise compared to the previous year. Provisions for the second quarter are projected to be around 220 billion KRW, and the CCR is estimated to increase by 53 basis points (1bp = 0.01 percentage points) year-on-year to 136 basis points."