[Click e-Stock] Why NH Investment & Securities Deserves Attention When Sector Momentum Is Weak

On August 25, iM Securities evaluated NH Investment & Securities as the best option when sector investor sentiment is weak.

According to iM Securities’ analysis, NH Investment & Securities tends to show a limited improvement in valuations when sector sentiment improves due to such factors as an increase in trading volume and a rise in indices. Yongjin Seol, a researcher at iM Securities, explained, “This is due to the relatively lower return on equity (ROE) resulting from farmland expense outlays. In addition, its high dividend payout ratio and group-level risk-weighted asset (RWA) constraints make it difficult for NH Investment & Securities to allocate capital aggressively during strong growth phases, and this serves as a disadvantage compared to other independent securities firms.”

In contrast, when trading volume contracts and the index slows—leading to a general weakening of momentum across the securities sector—NH Investment & Securities tends to outperform its peers. Researcher Seol noted, “Thanks to its high dividend payout ratio, the attractiveness of shareholder returns remains high even during periods of profit contraction. Its relatively low beta also accentuates the defensive nature of the stock compared to other securities firms, and the valuation burden is expected to ease.” He added, “Given these factors, as market trading volume has consistently declined since June and future earnings forecasts for the industry as a whole have been trimmed—indicating weakening momentum—NH Investment & Securities’ relative appeal stands out in the current phase.”

NH Investment & Securities is expected to post a consolidated net profit attributable to controlling interests of 1.7228 trillion won for this year, up 67% from the same period last year, a result in line with consensus (average of securities firms' estimates). Researcher Seol commented, “On a stand-alone basis, brokerage commission profit and loss increased by 134.4% to 1.3207 trillion won. Even though we assumed an overall decline in trading volume in the second half of the year, the absolute level of trading activity remains high, so favorable performance is expected to continue throughout the year.” Regarding other segments, he explained, “We expect a 104.7% increase in gains on valuation and disposal, as well as in other sectors, amounting to 896.4 billion won. While the bond segment may show some weakness, we foresee strong profits driven by equities, derivatives, and non-marketable investments in investment banking (IB).”

This year’s shareholder return is expected to be maintained at more than 40%, in order to meet high-dividend company requirements. Researcher Seol predicted, “Based on our estimated dividend payout ratio of 45%, common stock dividend per share (DPS) is expected to be 2,000 won, with a dividend yield of 7.7%. Even if future profits shrink, considering that the dividend payout ratio reached as high as 81% in the past and thereby cushioned the fall in DPS, we expect overall shareholder return to be defended through potential increases in payout ratio.”

Reflecting the contraction in trading volume, iM Securities lowered its target price for NH Investment & Securities from 41,000 won to 35,000 won, while maintaining a ‘Buy’ rating. Researcher Seol stated, “Given that July’s trading volume was 99.5 trillion won (including ETFs and NextTrade) and that cumulative trading volume through August 21 has fallen to about 70.2 trillion won, we revised our future trading volume projections downward to the level expected in the fourth quarter of 2025 through the first quarter of 2026, which led to the target price adjustment.” He further noted, “Investment risks include sluggish future profits due to trading volume contraction, as well as potentially larger-than-expected fines from the Fair Trade Commission’s bond Primary Dealer (PD) price-fixing case.”

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