Performance is Immunity... Unshaken Even by COVID-19

LG Electronics up 1.5%
Orion also exceeds 4% for two consecutive days
Green Cross up 12.78% compared to last month
Performance outlook downgrade causes concern

[Asia Economy Reporter Song Hwajeong] Despite the sharp decline in the stock market due to the spread of the novel coronavirus infection (COVID-19), companies with solid earnings showed favorable stock price trends. However, concerns remain that the downward revision of corporate earnings forecasts due to COVID-19 may negatively impact future stock price recovery.

As of 9:30 a.m. on the 18th, LG Electronics was trading at 50,200 KRW, up 1.52% (750 KRW) from the previous day. The rebound of LG Electronics, which had fallen for five consecutive trading days, was largely influenced by expectations of strong first-quarter earnings this year. Daishin Securities analyzed that LG Electronics' first-quarter operating profit would record 916.5 billion KRW, an 800% increase compared to the previous quarter, exceeding consensus. Park Kang-ho, a researcher at Daishin Securities, said, "Considering the impact of COVID-19, the performance is better compared to other IT companies," adding, "The damage from COVID-19 is minimal, and continuous replacement demand for premium products due to the spread of artificial intelligence (AI) and the Internet of Things is expected, leading to differentiated growth."

Kim Jun-hwan, a researcher at Hanwha Investment & Securities, also explained, "LG Electronics' first-quarter earnings are expected to record sales of 15.7 trillion KRW and operating profit of 893 billion KRW, exceeding the consensus by 6.7% despite the unstable domestic and international environment," and added, "Although there are concerns about global IT demand due to the COVID-19 situation, it is important to note that LG Electronics' earnings stability is higher compared to other IT sectors."

Orion has continued its upward trend for three consecutive days. Starting the day weak, Orion turned to an increase and was up 1.43% as of 9:40 a.m. Despite the recent sharp market decline, Orion recorded more than a 4% rise for two consecutive days. Strong February earnings led to the stock price increase. Orion posted sales of 139.7 billion KRW, a 32% increase year-on-year, and operating profit surged 439% to 19.4 billion KRW last month. Park Eun-jung, a researcher at Yuanta Securities, said, "February was a period when the impact of COVID-19 was extremely high in Korea and China, which contribute significantly to earnings, so concerns were high, but the company recorded solid earnings exceeding expectations," and added, "March is also showing favorable performance by each corporation, so the future stock price trend is expected to remain positive."

Green Cross, expected to have strong first-quarter earnings, also showed a sharp rise amid the recent weak market. Green Cross rose 7.27% on the 16th and 8.47% on the 17th, increasing 12.78% compared to the end of last month. Jin Hong-guk, a researcher at Korea Investment & Securities, said, "Due to a sharp increase in exports of highly profitable vaccines, first-quarter operating profit is expected to be 8.6 billion KRW, exceeding consensus by 10%," and forecasted, "With steady sales growth of vaccines and blood products and cost stabilization, this year's sales will reach 1.43 trillion KRW and operating profit 73.9 billion KRW, increasing 5% and 90% respectively compared to the same period last year."

While strong earnings are expected to serve as a solid shield amid the stock price plunge caused by fear of the epidemic, the continuous downward revision of corporate earnings forecasts is a cause for concern. According to financial information provider FnGuide, the consensus for KOSPI's first-quarter operating profit is 29.8028 trillion KRW, down 5.74% year-on-year. This figure has been revised downward by 5.23% compared to a month ago. Among the 18 major KOSPI sectors, only four sectors have seen upward revisions in consensus compared to a month ago. The electrical and electronics sector, which was expected to show clear earnings improvement from this year, was revised down by 0.5% compared to a month ago, while concerns over economic slowdown caused the chemical sector to fall 19.77% and the steel and metal sector 13.71%.

Min Tae-il, a researcher at Korea Investment & Securities, said, "From March, when COVID-19 rapidly spread worldwide, the consensus began to decline more sharply," adding, "Since COVID-19 is lasting longer than initially expected, the steep decline in earnings consensus is likely to continue."

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