[Edaily Reporter Kim Hyung-il ] HANWHA INVESTMENT & SECURITIES maintained its “Buy” rating on KAIT(123890)and raised its target price from 3,200 won to 3,700 won, noting that the company has entered a phase of expanding new orders amid a reduction in provisioning risks. The firm projected that the company’s fundamental improvement will become more visible as orders for urban redevelopment projects increase structurally.

On the 28th, Song Yu-rim, an analyst at HANWHA INVESTMENT & SECURITIES, stated, “While provisioning risks are decreasing, new order intake has entered a phase of expansion,” adding, “In particular, as orders for urban renewal projects increase structurally, the company’s fundamental improvement is expected to become visible.”

KAIT’s operating revenue for the first half of this year was 147.6 billion won, and operating profit was 41.8 billion won, representing year-over-year increases of 41.7% and 60.7%, respectively. Although provisions for credit losses in the first half rose by approximately 28 billion won compared to the same period last year, operating profit improved significantly due to substantial gains from fund management and the one-time recognition of commission revenue in the second quarter.

Operating revenue in the second half is expected to decline compared to the first half as one-time factors are excluded. However, with the scale of provisions significantly reduced, the trend of year-over-year performance improvement is expected to continue.

New orders are showing signs of recovery after hitting a low point in 2024. Orders for leveraged land trusts (general) reached 32 billion won in the first half of this year, marking the highest half-year figure since 2022. Orders for leveraged land trusts, which had plummeted in the second half of 2022 due to a slump in the housing sales market and the burden of provisions, appear to be rebounding.

The expansion of orders for urban renewal projects is also notable. Orders for such projects have risen sharply over the past five years, exceeding 50% of total orders. Analysts predict that the increase in urban renewal project orders will become a structural trend, given the expansion of the urban renewal market and the structure of order recognition at each project stage.

Accordingly, it is projected that the business fundamentals of KAIT, which had been sensitive to the housing sales market, will improve. The assessment is that the company will enter a phase of earnings stabilization as provisions peak out and orders for urban renewal projects expand.

HANWHA INVESTMENT & SECURITIES calculated KAIT’s target price by applying a target price-to-book (P/B) ratio of 0.4x to the 12-month forward book value per share (BPS). The projected return on equity (ROE) was raised from the previous 5.1% to 5.8%.

Assuming a dividend per share (DPS) of 170 won, the dividend yield stands at 6.6%. Based on HANWHA INVESTMENT & SECURITIES’ estimates, the current stock price corresponds to a 12-month forward price-to-earnings (P/E) ratio of 4.7x and a price-to-book (P/B) ratio of 0.27x.