Overseas Expansion Will Increase Regulatory And Digital Risks

Key Takeaways

• Rapid global expansion and exposure to digital-first competition heighten risks of underperformance, capital erosion, and sustained margin pressure for Mirae Asset Securities.
  
• Digital disruption, passive investing trends, and reliance on volatile trading income threaten future profitability and force costly technological reinvestment amid margin compression.
  
• Expansion in wealth management, overseas operations, and digital innovation positions Mirae Asset Securities for diversified, resilient earnings and long-term growth in Asian and global markets.

Catalysts

Operates as a financial investment company in South Korea and internationally.

• The rapid global expansion, including substantial investment in Sharekhan in India and ongoing overseas ventures, exposes Mirae Asset Securities to significant risks of underperformance and capital erosion, especially as global regulatory tightening and heightened competition from nimble digital-first entrants may drive up costs and strain net margins for these international operations.
  
• Accelerating adoption of passive investing, exchange-traded funds, and digital fintech platforms is causing clients to migrate away from traditional brokerage and wealth management services, likely reducing future fee-based revenues and diminishing the profitability of Mirae's expanding assets under management.
  
• Intense competition in the Asian pension and wealth management sector, alongside the proliferation of low-cost robo-advisors, threatens Mirae's ability to maintain growth in pension assets and margins, especially as client loyalty erodes and customer acquisition costs rise due to commoditized digital offerings.
  
• Heavy reliance on volatile proprietary trading income and alternative asset classes, including substantial exposure to nearly ₩1.4 trillion in overseas commercial real estate, will heighten earnings volatility and leaves the company vulnerable to further valuation losses, impairments, and subdued returns-even as management expects additional write-downs in coming years.
  
• Persistent industry margin compression, driven by digital disruption and consolidation among larger, more technologically advanced global peers, will force Mirae Asset Securities to undertake costly and ongoing technology investments while legacy business lines become structurally less profitable, putting long-term pressure on operating leverage and return on equity.

Mirae Asset Securities Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Mirae Asset Securities compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Mirae Asset Securities's revenue will decrease by 49.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 5.0% today to 54.9% in 3 years time.
• The bearish analysts expect earnings to reach ₩1045.6 billion (and earnings per share of ₩1586.2) by about July 2028, up from ₩727.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, down from 15.9x today. This future PE is lower than the current PE for the KR Capital Markets industry at 18.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.86%, as per the Simply Wall St company report.

Mirae Asset Securities Future Earnings Per Share Growth

Risks

• Expansion in global wealth management, pension, and overseas business segments-especially after the acquisition of Sharekhan in India-positions Mirae Asset Securities to tap into long-term demographic and economic growth in Asia, which may drive sustained increases in revenue and client assets over time.
  
• Continued strong growth in overseas brokerage and trading, evidenced by a 114% year-on-year increase in overseas stock commission revenue and substantial gains in assets under management, could provide diversified and resilient earnings streams, supporting overall profitability and financial stability.
  
• The company's active investment in AI-driven technology and digitalization, including robotics advisory and automated investment tools, enhances operational efficiency and broadens its service capabilities, which may lead to improved cost control and higher net margins.
  
• Strategic focus on shareholder value, with ambitious plans for significant share buybacks and consistent dividend policies, can provide direct support to the share price and offer a buffer against downside market volatility through increased market trust and capital returns.
  
• Early and ongoing investment in the pension business, combined with regulatory changes such as the retirement pension transfer system, is creating a compounding effect on recurring revenues and profit growth, setting the company apart from competitors and potentially providing stable, long-term earnings growth.

Valuation

• The assumed bearish price target for Mirae Asset Securities is ₩10500.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mirae Asset Securities's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩28000.0, and the most bearish reporting a price target of just ₩10500.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₩1906.1 billion, earnings will come to ₩1045.6 billion, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 9.9%.
• Given the current share price of ₩20150.0, the bearish analyst price target of ₩10500.0 is 91.9% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.