Mirae Asset Securities: increase in the volatility of asset valuations

The author is an analyst at KB Securities. He can be contacted at cygun101@kbfg.com. — Ed.

Hold BUY; reduce the target price by 4.8% to 10,000 KRW

We maintain BUY on Mirae Asset Securities but reduce our TP by 4.8% to 10,000 KRW. Our rating is unchanged given (1) continued efforts to support the share price via share buybacks and (2) the recent bearish performance of the shares (the share price fell to 2022E BVPS from 0.46x). Our TP was derived by applying a target multiple of 0.57x (Sustainable ROE: 6.6% → 6.4%; COE: 9.2% → 9.4%; TGR: 2.3% → 2.5 %) at KRW17 734 12 m before BVPS. Some invested assets performed well (eg Global X, Naver Financial) while others did not; Didi Chuxing stock (acquired before IPO) fell 36.1% in 4Q21 and 65.7% on March 25. Poor performing investments have boosted NP volatility, which should create some pressure on the stock price.

Decline in NP 2022E (attributable to controlling interests) 7.7% to KRW 845.1 billion

We are revising down 2022E NP (attributable to majority stakes) by 7.7% to KRW 845.1 billion to account for low earnings estimates and downward revisions to daily trading averages (the trading value of 2022E decreased by 14.7% from 22.6 tn at KRW to 19.3 tn).

1Q22E consolidated NP (attributable to controlling interests) revised down to KRW 174.1 billion (below consensus); depreciation of subsidiaries offsetting capital gains on non-marketable assets

We forecast 1Q22 NP (attributable to majority stakes) at KRW 174.1 billion (-3.8% QoQ), 28.3% below market consensus. Lower earnings are expected to be attributable to (1) lower brokerage earnings (-10.0% vs. quarter) amid deteriorating brokerage business conditions and (2) a 51.5% decline compared to the quarter of trading and financial products revenues. Earnings are expected to be impacted by a strong base created by Alpha Dome City’s KRW 200.0 billion dividend in 4Q21 and the impact of rising interest rates on bond valuations. Autonomous non-operating income is expected to continue to struggle due to impairments incurred by subsidiaries, which may be partially offset by the revaluation of non-marketable assets.

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