[Click e-Stock] "Mirae Asset Securities: Limited Further Upside... Investment Rating Downgraded"

Investment Rating Downgraded from 'Buy' to 'Neutral'

On July 9, Korea Investment & Securities downgraded its investment rating on Mirae Asset Securities from 'Buy' to 'Neutral', citing limited further upside potential for the stock price.

Baek Doosan, an analyst at Korea Investment & Securities, stated, "We have raised our sustainable return on equity (ROE) from 9.1% to 9.3% in consideration of strong earnings. However, with the current price-to-book ratio (PBR) at 0.92 times, even if we apply a cost of capital in the 11% range reflecting expectations for share buyback and cancellation policies, the potential for further stock price appreciation remains limited."

However, he also expressed the view that the stock's downside rigidity will remain solid. Baek commented, "This year, the earnings per share (EPS) growth rate is robust at 23%, and policy momentum related to the domestic stock market remains strong. Additionally, after the capital company's purchase of common shares in July is completed, an announcement regarding share buyback and cancellation is expected, which should further reinforce the stock's downside rigidity."

Mirae Asset Securities' second-quarter results this year are expected to exceed market expectations. Baek explained, "Second-quarter controlling net profit is projected at KRW 299.1 billion, surpassing the consensus (the average forecast by securities firms) by 25%. By segment, trading profit is expected to reach KRW 392.2 billion, up 20% from the previous quarter, driven by favorable conditions in the domestic capital market and solid profit generation from investment assets."

In particular, fair value gains and losses are expected to remain strong this quarter, following the previous quarter. Baek analyzed, "While additional valuation gains related to overseas pre-IPO investments are being realized, valuation losses related to overseas commercial real estate are expected to decrease compared to the previous quarter. This improvement in fair value gains and losses, alongside trading profits, is also positively impacting the performance of overseas subsidiaries."

Brokerage commissions are expected to reach KRW 223.9 billion, up 13% from the previous quarter. Baek noted, "Although overseas stock commission revenue is expected to decrease by 3%, domestic stock commission revenue is projected to increase by 29%. Net interest income is expected to improve slightly to minus KRW 17.2 billion compared to the previous quarter, due to expanded credit profit based on increased balances and reduced funding costs."