[Click e-Stock] "Meritz Financial, Solid Downside on Shareholder Returns... A Stable Choice"

On May 15, Shinhan Investment Corp. maintained its "Buy" rating and target price of 1,430,000 won for Meritz Financial Group, stating, "While there is limited short-term upside potential for the stock price, solid shareholder returns provide strong downside support, making it a stable investment option."

In the first quarter of this year, Meritz Financial Group posted a consolidated net profit attributable to controlling shareholders of 609.8 billion won, in line with market consensus. This figure represents a 4.1% increase compared to the same period last year. In the fire insurance segment, operating profit was 621.9 billion won and net profit was 462.5 billion won, down 5.9% and 5.8% year-on-year, respectively. The average monthly new protection-type insurance contracts amounted to 9.4 billion won, a decrease of 7.2%. Researcher Lim Heeyeon analyzed, "There was no impact from the guidelines on non-cancellable or low-cancellation insurance, so the effect of preemptive sales ahead of premium rate hikes was limited."

In the securities segment, consolidated operating profit was 148.2 billion won, down 4.8% year-on-year, but net profit attributable to controlling shareholders reached 187.4 billion won, a significant 49.9% increase from the previous year. Lim noted, "The lower consolidated profit compared to the separate financial statements reflects an adjustment effect of 80.7 billion won in capital dividend income. Additionally, about 50 billion won in overseas alternative asset dividend income was recognized as non-operating profit, leading to a sharp year-on-year increase in net profit."

Regarding the Homeplus deal, which had been a source of market concern, provisions of 17.8 billion won and reserves of 225.5 billion won were set aside. Lim evaluated, "Although the possibility of losses has not yet been confirmed, the company responded in accordance with accounting-based soundness classifications."

The consolidated net profit for this year is projected at 2.4 trillion won. Lim stated, "The scale of share buybacks and cancellations this year is expected to reach 1.1 trillion won, which should lead to a reduction in the number of shares. While the proportion of short selling is increasing, management currently views this as an opportunity for share repurchases."