[Edaily Reporter Kim Kyung-eun] #Samsung Life Insurance (032830) shares have surged 134% since the start of the year, but analysts are expressing caution, arguing there is insufficient justification for the current share price level. The gap between the target price (312,000 won) and the current share price (368,000 won) has already reached 15%.

Kim Do-ha, an analyst at Hanwha Investment & Securities, stated, “It is unreasonable to assume a significant increase in business value to explain Samsung Life Insurance’s stock price rise,” adding, “While the market appears to have reflected a reduced discount rate on the net asset value (NAV) of its #Samsung Electronics stake, there is no evidence to support this.”

Samsung Life’s year-to-date stock return stands at 134%, significantly outperforming not only the KOSPI (+83%) but also the average for other insurance stocks (+21%). On a quarterly basis since the end of March, while the KOSPI rose 53% and the average for insurance stocks rose 11%, Samsung Life’s stock price surged 75%.

Hanwha Investment & Securities has raised its target price four times this year, from 176,000 won in January to 230,000 won in March, 250,000 won in April, and 312,000 won in May. During this period, the value of the insurance business increased by 6.7 trillion won, from 15.3 trillion won in January to 22.1 trillion won in May, while the value of the stake in Samsung Electronics rose by 20.4 trillion won, from 19.9 trillion won to 40.3 trillion won.

Researcher Kim broke down the causes of Samsung Life’s stock price rise into two scenarios. First, if the NAV discount rate for the Samsung Electronics stake is fixed at 55%, calculations show that the insurance business value would need to increase by 69% to account for the stock price rise since the end of the first quarter. Second, if the business value is fixed at 22 trillion won, the value of the Samsung Electronics stake would need to increase by 155%, but Samsung Electronics’ stock price rose by only 81% during the same period.

Ultimately, this suggests that the market is assuming a lower NAV discount rate. The key argument against a reduction in the NAV discount rate is Samsung Life Insurance’s dividend policy. “Samsung Life Insurance has no precedent of distributing non-recurring gains (such as gains from the sale of shares or special dividends) arising from its holdings on an equal footing with other profits, nor has it announced any such plans,” the report states.

Since Samsung Life Insurance holds an 8.5% stake in Samsung Electronics, there is a market view that expectations for Samsung Electronics’ special dividends are already reflected in Samsung Life Insurance’s stock price. However, the uncertainty is too great to use this as a basis for pre-reflecting such expectations in the stock price. Analyst Kim emphasized, “At this point, careful consideration of NAV valuation is the top priority when approaching investments,” and maintained a ‘Hold’ rating.