"1 Trillion, Yaaas"... This Stock Can't Celebrate Its Earnings Surprise as Target Prices Are Lowered [Weekend Money]

Brokerages Cut Target Price for Korea Investment Holdings

Greater Market Volatility and Lower Trading Volume in Second Half

"The business climate is the same, but the playbook is different." "Overwhelmed by fundamentals."

This is how the securities industry described Korea Investment Holdings, which recorded quarterly net profit attributable to controlling shareholders close to 1 trillion won. Korea Investment Holdings, the parent company of Korea Investment & Securities, delivered a second-quarter earnings surprise that exceeded even the market's elevated expectations. However, despite these stellar results, major securities firms have successively lowered their target prices, and the stock price has plunged as well.

According to the securities industry on August 8, eight securities firms, including KB Securities, Samsung Securities, and Shinhan Investment & Securities, lowered their target prices for Korea Investment Holdings as of the previous morning. Samsung Securities lowered its target price from 320,000 won to 290,000 won. KB Securities and Shinhan Investment & Securities also lowered their target prices from 350,000 won and 370,000 won to 330,000 won and 300,000 won, respectively. Lowered target prices were also confirmed at iM Securities (284,000 won), Daishin Securities (286,000 won), Meritz Securities (300,000 won), NH Investment & Securities (340,000 won), and Daol Investment & Securities (370,000 won). On the same day, the share price of Korea Investment Holdings also dropped 7.8%, ending regular trading at 188,000 won per share.

The previously released second-quarter consolidated net profit attributable to controlling shareholders for Korea Investment Holdings increased by 84.7% year-on-year to 995.9 billion won. Looking at analyst reports released immediately after the results beat market expectations, headlines that drew attention to the strong performance included "1 Trillion, Yaaas" (SK Securities, target maintained at 410,000 won), "Overwhelmed by fundamentals" (Daishin Securities), and "The business climate is the same, but the playbook is different" (Shinhan Investment & Securities).

However, the reason securities firms collectively lowered their target prices is interpreted to be due to sharply increased stock market volatility and rising market interest rates in the second half of the year. Samsung Securities analyst Jung Minki commented, "Driven by strong subsidiary earnings, the company recorded an earnings surprise, exceeding consensus by 19%," but also pointed out, "In the second half, there is a possibility of either reduced or negative valuation gains on investment assets due to expanding stock market volatility." Kim Ji-won, an analyst at Daol Investment & Securities, stated, "After reflecting July's trading volume, we revised down our previous full-year outlook. It is necessary to monitor market trends in the second half."

Seol Yongjin, an analyst at iM Securities, also explained the reason for the target price cut: "We have adjusted the cost of equity (CoE) to 12.7%, reflecting the base rate hike and increased market volatility." He further elaborated, "Average daily trading value dropped from about 137.7 trillion won in June to roughly 99.5 trillion won in July amid market correction, and the downward trend has continued into August." He noted that questions remain regarding ▲ the sustainability of sharply increased wrap account fee profits ▲ value operation's strong first-half performance based on investment asset valuation gains ▲ high volatility in profits from key subsidiaries such as savings banks and capital businesses.

Even though target prices were lowered, these securities firms maintained their "Buy" recommendations and top-pick sector ratings. Analysts acknowledged that the intrinsic competitiveness of Korea Investment Holdings, such as stable operating profit and return on equity (ROE), remains at the top level in the industry.

Daishin Securities analyst Park Hyejin commented, "While we are lowering our target price, we maintain our 'Buy' recommendation and sector top pick, as the company boasts the best profitability in the industry. Recently, there are widespread concerns about earnings declines for securities stocks in the second half, but even considering this, the company is expected to have little difficulty achieving an annual net profit of 3 trillion won this year." Analyst Jung Minki added, "With a high expected dividend yield of 6% for 2026 and 6.6% for 2027, its valuation discount advantage stands out clearly," reiterating the "Buy" recommendation.

Analyst Seol Yongjin explained, "Compared to peers, the company is less dependent on brokerage-related profit and continues to generate stable operating profit based on the largest short-term note issuance in the sector. This will sustain the company's earnings power advantage even if trading volume contracts further." He added, however, "Due to factors such as shrinking trading volume and weak investor sentiment in the sector, there is growing uncertainty over profit growth in 2027, which will remain a continuing concern."

Additionally, Korea Investment Holdings' ongoing efforts to acquire an insurance company have also been cited as a short-term burden. Lim Hee-yeon, an analyst at Shinhan Investment & Securities, said, "Considering medium- to long-term group expansion and funding diversification for synergies with asset management affiliates, the move is reasonable." However, she pointed out, "There are concerns over additional capital contributions beyond the acquisition price and potential dilution of group ROE in the short term." She added, "Although these factors appear to be already reflected in the share price, depending on acquisition conditions, there is a likelihood of heightened short-term share price volatility."

This content was produced with the assistance of AI translation services.