Korea Investment & Securities maintained a "neutral" rating on rival brokerage Mirae Asset Securities (006800.KS), citing valuation concerns despite the company's record quarterly earnings.
Baek Doo-san, an analyst at Korea Investment & Securities, kept the neutral rating in a report Tuesday. A neutral rating indicates an expected stock price movement of -15% to 15% relative to the market index. Korea Investment & Securities has maintained the neutral stance since downgrading Mirae Asset from buy to neutral in July last year.
Korea Investment & Securities did not provide a target price for Mirae Asset Securities. The stock closed at 74,300 won the previous day. The average target price among brokerages is 79,067 won.
Mirae Asset Securities disclosed the previous day that it posted first-quarter consolidated net profit of 1.019 trillion won, becoming the first Korean brokerage to exceed 1 trillion won in quarterly net profit. Operating profit reached 1.375 trillion won and pretax profit came in at 1.3576 trillion won, up 297% and 292% from a year earlier, respectively. First-quarter net profit attributable to controlling shareholders was 996.2 billion won, exceeding Korea Investment & Securities' estimate by 32%.
"The strong first-quarter performance was primarily driven by consolidated trading gains that beat expectations," Baek said. "Diversification in trading operations continues through proprietary investments (PI) including seeding and arbitrage trading." He added that "the diversification of investments in innovative companies spanning both listed and unlisted firms, along with solid related earnings, is a positive factor."
However, Korea Investment & Securities pointed out that Mirae Asset Securities' estimated price-to-book ratio (PBR) of 2.78 times for this year raises concerns about the stock's peak valuation. "There is a need to raise the appropriate multiple that can be applied to trading segment earnings through diversification of the investment asset portfolio and investment recovery cycle," Baek said.
He added, "It is also necessary to successfully expand the global comprehensive investment platform business encompassing traditional assets, digital assets, and tokenized securities in Hong Kong, the United States, and other markets, thereby raising the appropriate multiple applied to the related wealth management (WM) business."
