[Click eStock] "Meritz Financial, Value-Up Goal Reached... PER Approaching 10 Times"

Limited Potential for Further Gains... Less Than 20%
Mirae Asset Securities Downgrades Investment Opinion to 'Short-term Buy'

As Meritz Financial Group's price-to-earnings ratio (PER) approaches the company's initially announced value enhancement (value-up) plan target of 10 times, analysis suggests that the potential for further stock price increases is limited.

On the 20th, Mirae Asset Securities downgraded its investment opinion on Meritz Financial Group from 'Buy' to 'Short-term Buy (trading buy)' while maintaining the target price at 130,000 KRW.

This is because the stock price has continuously risen recently, reducing the upside potential to less than 20% compared to the target price. As of the closing price on the 17th, Meritz Financial Group's stock price was recorded at 111,800 KRW.

Mirae Asset Securities projected Meritz Financial Group's controlling shareholder net profit for the fourth quarter of last year at 396.6 billion KRW, slightly exceeding the market consensus of 381.5 billion KRW. While Meritz Fire & Marine Insurance is expected to see profit growth due to increases in insurance and investment income, Meritz Securities is anticipated to experience a decline in profit compared to the same period last year due to reduced interest income.

Specifically, Meritz Fire & Marine Insurance's performance is expected to improve as the loss burden contract costs related to incurred but not reported (IBNR) losses from the same period last year decrease. It is estimated that there will be no impact from changes in assumptions regarding surrender rates for no- and low-surrender value insurance, nor any unusual factors such as losses from bond replacement trading. Although the overall industry has seen an increase in automobile insurance loss ratios, the company's limited exposure to automobile insurance means the impact is expected to be minimal.

Meritz Securities is estimated to see a reduction in interest income due to a decrease in credit extension balances and a decline in market interest rates. Although investor deposits have rapidly increased recently due to the free commission policy on domestic and international stock trading, it is analyzed that this will not translate into revenue until new customers begin to use credit extensions. Trading and product income are also expected to be weak as bond valuation gains slow down following a year-end rebound in market interest rates.

Meanwhile, Meritz Financial Group has already announced a policy to repurchase and retire treasury shares worth approximately 1 trillion KRW during the year. Taejun Jeong, a researcher at Mirae Asset Securities, stated, "Meritz Financial Group's dividend per share last year is expected to remain at 1,200 KRW, down from the previous year. However, considering the effect of treasury share repurchases and retirements, the shareholder return rate based on the closing price on the 17th is expected to reach 5.6%."